Measuring Credit Risk from annual statements -The case of Greek Banks

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• Abstract

  In this study we present a framework for the approximation of a commercial Bank’s Credit Portfolio Risk. The proposed procedure would be particularly useful both to external investors, as it is fairly simple and has minimal data and cost requirements, and also to Supervisory Authorities as an annual precursor Credit Risk Index, based on publicly available statements. The quantification of Credit Risk should incorporate: • The additional provisions required to absorb expected future losses • The Bank’s ability to cover these losses, given its current infrastructure and business model The above mentioned info is sufficiently captured by the proposed BCRC index. As an application Credit Risk measurements for the four Greek systemic Banks are provided for 2014-2016 period.
  
  JEL classification numbers: G24, G32
  Keywords: Credit Risk, Banking, Expected Credit losses, Capital Requirements, Risk Management, Moore-Penrose Inverse, BCRC Index