Title: Credit risk stress testing: theory and practice of the Spanish evidence
Authors: Ahlem-Selma Messai; Mohamed Imen Gallali
Addresses: University of Economics and Management of Mahdia, University of Monastir, Monastir 5000, Tunisia ' Higher Business School of Tunis, University of Manouba, Manouba, Tunisia
Abstract: This paper presents a new methodology to estimate banking system credit portfolio's losses. For this purpose, we used quarterly data for the period from 2000 to 2011 in order to estimate unexpected losses in the credit portfolio for four Spanish sectors under extremely bad conditions. Our results show that macroeconomic shocks (extreme inflation, gross domestic product and unemployment rates) affect negatively the Spanish banking system. The unusual thing about this study is that it was conducted with different sectors (industry, construction, agriculture and services). We find that construction was the most damaged sector. Our study will discuss the reasons for adopting stress tests and will provide solutions to prevent crises and to absorb losses especially in Spain.
Keywords: credit risk stress testing; loss distribution; non-performing loans; Spanish sectors.
International Journal of Management and Enterprise Development, 2018 Vol.17 No.2, pp.136 - 154
Received: 28 Feb 2017
Accepted: 13 Apr 2017
Published online: 28 Mar 2018 *