Credit Risk Sensitivity to Macroeconomic Factors
From Open Risk Manual
Credit Risk Sensitivity to Macroeconomic Factors
This entry is a catalogue of macroeconomic factors that may have an influence in the performance of credit contracts. The relationship of macroeconomic drivers to credit risk is important in specific contexts such as Bank Stress Testing or IFRS 9 but is useful more broadly for all Credit Portfolio Management
The catalogue aims to capture relevant factors by the main dimensions:
- applicable region (country)
- applicable legal entity (individuals, firms, sovereigns)
- credit parameter (exposure, probability of default, loss given default etc)
- credit lifecycle stage (performing versus non-performing loans)
Remarks
- The list does not aim to provide definitive, detailed or numerical relationships. Besides the intrinsic difficulty of establishing definitive relationships, the precise linkages of macro factors to credit risk will always depend on details of the credit portfolio being considered
- In concrete applications the catalogue is best used either as a starting point for designing an analytical approach or as cross-check of existing work.
- The focus of this list is on publicly accessible references, possibly backed by quantitative studies, but anecdotal evidence is acceptable and encouraged.
- The structure of the catalog reflects the typical cause / effect arrangement of analytical frameworks for credit risk analysis. In the simplest case this translates into linear relationships but may be far more complex, with secondary effects and feedback loops
NB: The catalog of Credit Risk Sensitivities to Macroeconomic Factors is provided as-is without any implied endorsement or validation of the suitability, originality, accuracy or completeness of said resources for any purpose.
Catalogue
- Macro factors are drawn from the macroeconomic factor list where the definitions and further information per factor are provided
- Entries are listed in parameter/factor format (hence multiple possible factors per parameter)
- Listing a parameter/factor pair implies there is at least some evidence for a relationship. Further remarks may constraint the relationship further (e.g. positive correlation).
- Notes is a general purpose field for remarks that may assist with placing the relationship in context (e.g. evidence for unstable or non-linear associations etc.)
Risk Parameter | Factor | Impact | Notes | References |
---|---|---|---|---|
Retail Mortgages | Unemployment Rate | Positive Correlation | ||
Commercial Real Estate | Gross Domestic Product | Negative Correlation | ||
Corporate Loans | Gross Domestic Product | Negative Correlation | ||
Retail Mortgages | Gross Domestic Product | Negative Correlation | ||
Consumer Credit | Gross Domestic Product | Negative Correlation | ||
Banks | Gross Domestic Product | Negative Correlation | ||
Sovereigns | Gross Domestic Product | Negative Correlation | ||
Retail Mortgages | Private Consumption | Negative Correlation | ||
Consumer Credit | Private Consumption | Negative Correlation | ||
Commercial Real Estate | Investment Growth | Negative Correlation | ||
Corporate Loans | Investment Growth | Negative Correlation | ||
Commercial Real Estate | Export Growth | Negative Correlation | ||
Corporate Loans | Export Growth | Negative Correlation | ||
Commercial Real Estate | Stock Market Valuation | Negative Correlation | ||
Corporate Loans | Stock Market Valuation | Negative Correlation | ||
Retail Mortgages | Unemployment Rate | Positive Correlation | ||
Consumer Credit | Unemployment Rate | Positive Correlation | ||
Commercial Real Estate | Inflation | Negative Correlation | ||
Corporate Loans | Inflation | Negative Correlation | ||
Retail Mortgages | Inflation | Negative Correlation | ||
Consumer Credit | Inflation | Negative Correlation | ||
Banks | Inflation | Negative Correlation | ||
Sovereigns | Inflation | Negative Correlation | ||
Commercial Real Estate | Long Term Rates | Positive Correlation | ||
Corporate Loans | Long Term Rates | Positive Correlation | ||
Retail Mortgages | Long Term Rates | Positive Correlation | ||
Consumer Credit | Long Term Rates | Positive Correlation | ||
Banks | Long Term Rates | Positive Correlation | ||
Sovereigns | Long Term Rates | Positive Correlation | ||
Commercial Real Estate | Short Term Rates | Positive Correlation | ||
Corporate Loans | Short Term Rates | Positive Correlation | ||
Retail Mortgages | Short Term Rates | Positive Correlation | ||
Consumer Credit | Short Term Rates | Positive Correlation | ||
Banks | Short Term Rates | Positive Correlation | ||
Sovereigns | Short Term Rates | Positive Correlation | ||
Retail Mortgages | Real Estate Prices | Negative Correlation | ||
Commercial Real Estate | Real Estate Prices | Negative Correlation | ||
Commercial Real Estate | Vacancy Rates | Positive Correlation | ||
Corporate Loans | Commodity Prices | Positive Correlation | ||
FX Lending Risk | FX Rates | Negative Correlation |
References
- ↑ ECB: Stress-Test Analytics for Macroprudential Purposes in the Euro area, Feb 2017