Credit Risk in Two Institutional Regimes: Spanish Commercial and Savings Banks
Year: 2003
Type: preprint
Abstract: Although credit risk is an important factor that financial institutions must cope with, the determinants of bank problem loans have been little studied. Using panel data, we compare the determinants of problem loans of Spanish commercial and savings banks in the period 1985-1997, taking into account both macroeconomic and individual bank level variables. The GDP growth rate, firms, and family indebtedness, rapid past credit or branch expansion, inefficiency, portfolio composition, size, net interest margin, capital ratio, and market power are variables that explain credit risk. However, there are significant differences between commercial and savings banks, which confirm the relevance of the institutional form in the management of credit risk. Our findings raise important bank supervisory policy issues: The use of bank level variables as early warning indicators, the advantages of bank mergers from different regions, and the role of banking competition and ownership in determining credit risk.
Source: SSRN Electronic Journal
Authors: Jesús Saurina Salas, Vicente Salas Fumás
Institutions: Bank of Spain, Universidad de Zaragoza
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W3123073540