Sofronova V.V.National Research University Higher School of Economics, Nizhny Novgorod Branch, Nizhny Novgorod, Russian Federation valentina.nnov@mail.ru
Importance External shocks slow down the national economic development, thus worsening borrowers’ ability to service their debts. Hence, it is reasonable to analyze the creditworthiness of rating systems so to differentiate clients per their risk exposure, through the borrower default model. Objectives The research systematizes and selects financial and other corporate performance indicators that give a true view of financial standing and default probability. The research tests the model in entities within another period, substantiates that banks should use rating system for credit risk assessment on the basis of default probability so to properly differentiate borrowers. Methods The research draws upon methods of analysis, synthesis and summarization of the current phenomena in the bank lending segment, econometric analysis of factors that influence corporate financial position, regression analysis, model testing. Results I found that financial performance appraisal indicators differently influenced the probability of default. I built a model to assess the probability of the borrower’s default with forecasting power. The article also describes trends in bank lending. Conclusions and Relevance The quality of banks’ loan portfolios deteriorates. It would be reasonable to differentiate the creditworthiness of borrowers on the basis of default rating models and apply a conservative approach to identify factors influencing corporate financial standing. I suggest ranking borrowers by their credit risk exposure to set up an interest rate, and make banks liable for non-compliance with creditworthiness assessment procedures.
Zhevaga A.A., Morgunov A.V. Ispol'zovanie svodnykh makroekonomicheskikh indikatorov dlya kalibrovki vnutrennikh reitingovykh modelei v bankakh [Using combined macroeconomic indicators to calibrate internal rating models in banks]. Den'gi i kredit = Money and Сredit, 2015, no. 8, pp. 39–53.
Karminskii A.M., Solodkov V.M., Sosyurko V.V. Edinoe reitingovoe prostranstvo: shag ot mifa k real'nosti [The single rating environment: a step from a myth to reality]. Bankovskoe delo = Banking, 2011, no. 5, pp. 58–63.
Vasilyuk A., Karminskii A., Sosyurko V. Sistema modelei reitingov bankov v interesakh IRB-podkhoda: sravnitel'nyi i dinamicheskii analiz [The set of bank rating models in line with the IRB-approach: a comparative and dynamic analysis]. Moscow, HSE Publ., 2011, 68 p.
Altman E.I. Financial Ratios. Discriminant Analysis, and the Prediction of Corporate Bankruptcy. Journal of Finance, 1968, vol. 23, no. 4, pp. 589–609.
Credit Risk Modeling: Current Practices and Applications. Basle, Bank for International Settlements, 1999, 65 p. Available at: Link.
Kozlova D.D. Pravovye problemy i otvetstvennost' kreditnykh organizatsii pri proverke kreditosposobnosti zaemshchikov v Rossii i Evropeiskom soyuze [Legal issues and liability of credit institutions for checking borrowers’ creditworthiness in Russia and the European Union]. Predprinimatel'skoe pravo. Prilozhenie “Pravo i biznes” = Business Law. Law and Business Supplement, 2015, no. 2, pp. 38–42.
Simons D., Rolwes F. Macroeconomic Default Modeling and Stress Testing. International Journal of Central Banking, 2009, September.