THE SIGNALLING EFFECTS OF BANK LOAN-LOSS RESERVE ADDITIONS

Abstract

This study examines the market’s reaction to announcements of additions to the Loan Loss Reserve (LLR) account resulting from diverse problems in a bank’s loan portfolio which are unrelated to an international debt crisis. For the overall sample, with no division by type of loan, the reaction to an increase in LLRs is negative and statistically significant before the announcement; however, it turns positive and remains statistically significant for several days afterwards. Viewing each category individually, the results vary. The largest statistically significant results are for Lesser Developed Country Loans and Foreign and Domestic Loans (positive reaction) and combination Real Estate and Energy Loans (negative reaction). A division of the data into two sub-samples, before and after 1987, indicates that investors appear to be more discerning of individual BHCs’ circumstances surrounding announcements after 1987.

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Global Sensitivity Analysis for Latent Factor Credit Risk Models

Abstract

This paper proposes the use of a global sensitivity analysis to evaluate the risk associated with a credit portfolio model. The main features of this approach are its ability to assess sensitivities in the presence of non-linearities and to rank the input factors with respect to their relevance for the output variable. The commonly used local sensitivity analysis which is nested in the global model cannot provide this information.
We analyze the static and time-varying uncertainties of three key input factors in a latent factor credit risk model, i.e. the multivariate distribution (copula), the default correlation and the default probability. Results show that the importance of the factors strongly depends on the average default probability of the portfolio and the analyzed quantiles of the default distribution. The proposed technique also provides information about trade-offs between the factors, e.g. between the default correlation and the copula.

KEYWORDS: credit risk model, latent factor model, copula, global sensitivity analysis






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FAKTOR-FAKTOR YANG MEMPENGARUHI TINGKAT SUKU BUNGA DEPOSITO BERJANGKA PADA BANK UMUM DI INDONESIA

Abstract

This research has a purpose to provide empirical evident about factors that affect interesr rate of deposit. The examined factors on this research are financial ratio and macroeconomic variables. The factors that are examined on this research are CAR (Capital Adequacy Ratio), ROA (Return On Assets), LDR (Loan to Deposit), inflation, liquidity of economic and growth of economic.The samples consist of 139 bank. The statistic method used to test on the research hypothesis is multiple regression. The result show that Return On Assets (ROA), Loan to Deposit (LDR) and inflation is a significant variables in determinant interst rate of deposit.

Keywords: interst rate of deposit, capital adequacy ratio, return on assets, loan to deposit.

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Credit Contagion and Trade Credit Supply: Evidence from Small Business Data in Japan

Abstract

In this paper, using microdata in Japan, we investigate whether credit contagion decreases trade credit supply for small businesses. In 1997-98 the Japanese economy experienced a large recession, and the number of dishonored bills and the number of bankruptcy filings caused by the domino effect increased. During a period of credit contagion, if firms possess higher financial claims than other firms, the possibility of default becomes higher. Therefore, if the problem of credit contagion is serious during such a period, suppliers withdraw trade credit from customers with higher trade receivables. They might also withdraw more trade credit from customers even though the credit risk of the customers is low. We find that during a recession, suppliers reduce trade credit more for small businesses with higher trade receivables. Additionally, in the manufacturing trade, credit is reduced for both risky and non-risky small firms. This effect in other industries, however, is weak.

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