Abstract
Resolution of non-performing loans is a key determinant of bank credit default losses. This paper analyzes macroeconomic and systematic frailty effects of the default resolution time for a sample of 17,395 defaulted bank loans in USA, Great Britain, and Canada. We find that frailties have a huge impact on the resolution times. In a representative sample portfolio, median resolution times more ...
Abstract
Resolution of non-performing loans is a key determinant of bank credit default losses. This paper analyzes macroeconomic and systematic frailty effects of the default resolution time for a sample of 17,395 defaulted bank loans in USA, Great Britain, and Canada. We find that frailties have a huge impact on the resolution times. In a representative sample portfolio, median resolution times more than double in a recession when compared to an expansion. This leads to highly skewed distributions of losses and considerable systematic risk of the bank portfolio. (C) 2017 Elsevier B.V. All rights reserved.
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