An Evaluation of Credit Risk in Bank Crediting—Take Mortgage Loans in C Bank as an Example

• Main Authors: Ming-Chun Wang, 王銘君
• Other Authors: Ying-Feng Chen；Su-Lien Lu
• Format: Others
• Language: zh-TW
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/71527938354845266009

碩士 === 樹德科技大學 === 金融與風險管理所 === 96 === Consumer Finance (CF) business is one of the most important income sources in domestic banks. The boom and decline in Consumer Finance business often affects the quality of a bank’s performance significantly. In 2007 the crisis of the sub-prime mortgage problem in the USA spread worldwide and the core of subprime mortgage problem is the matter of credit risk in nature. Therefore credit risk has been the most crucial part of bank risk management ability. The New Basel Capital Accord (Basel II) permits a bank to build its internal credit risk model. The needs of connection between model theory and model practice will be the key point for improving financial institutions’ credit risk management ability. This research modifies Merrick (2001) and analyzes one bank’s mortgage loan data in Taiwan. From the analysis of the data about principle and interest’s cash flow of loan repayments, the conclusion can be drawn as following: 1. The estimated default probability of this study is very close to the actual probability of default (2.51%) of the bank. It’s obvious that this research model shows considerable estimation ability. The empirical results show that the proposal model is reliable to estimate default probability. 2. The implied recovery rate estimated in this research model is 95.69%, which is very close to the sample bank. 3. This study also estimates four risk factors of Basel II, including Probability of Default (PD), Loss Given Default (PD), Exposure at Default (EAD), Maturity (M). On the whole, this study proposes a model that is expected to be helpful for financial institutions.