Template-Type: ReDIF-Article 1.0

Author-Name: Andras Viktor Szabo
Author-Workplace-Name: Magyar Nemzeti Bank
Author-Email: szaboand@mnb.hu


Title: Credit Risk Modelling of Mortgage Loans in the Supervisory Stress Test of the Magyar Nemzeti Bank

Abstract: The study aims to develop a model that can estimate potential credit risk losses for
housing and home equity loans using both macro and micro data, can be applied
uniformly to all banks and takes into account the new accounting standards (IFRS 9).
The model is based on a deal-level database for several Hungarian credit institutions,
covering an entire business cycle (2004-2018). It uses economic indicators that
strengthen risk sensitivity while also including transaction characteristics that
mitigate procyclicality. Modelling in a two-step process allows risk groups to be
created during forecasting in accordance with various credit characteristics. The
results show that the evolution of employment has a stronger effect on riskier groups
which potentially have only ad-hoc employment, while net wealth was not even
among the explanatory variables for the group containing the best debtors, who
presumably rely more on stable earned income.

Classification-JEL: C320, C530, G210, G280, G510
Keywords: time series modelling, econometric forecasting, bank, stress test, PD, household credit, IFRS 9
Pages: 56-94
Volume: 21
Issue: 1
Year: 2022
File-URL: https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-21-1-st3-szabo.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:21:y:2022:i:1:p:56-94