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Please use this identifier to cite or link to this item: http://hdl.handle.net/2108/201

Title: Credit risk versus capital requirements under Basel II: are SME loans and retail credit really different?
Authors: Jacobson, Tor
Linde, Jesper
Roszbach, Kasper
Keywords: internal ratings
credit risk
value-at-Risk
banks
Basel II
retail credit
SME
risk weights
Issue Date: 2-Feb-2004
Publisher: CEIS
Series/Report no.: Quaderni CEIS; 199
Abstract: The new Basel II regulation contains a number of new regulatory features. Most importantly, internal ratings will be given a central role in the evaluation of bank loans’ riskiness. Another novelty is that retail credit and SME loans will receive a special treatment in recognition of the fact that the riskiness of such exposure derives to a greater extent from idiosyncratic risk and much less from common factor risk. Much of the work done on the di¤erences between the risk properties of retail,SME and corporate credit has been based on parameterized model of credit risk. In this paper we present new quantitative evidence on the implied credit loss distributions for two Swedish banks using a non-parametric Monte Carlo re-sampling method following Carey [1998]. Our results are based on a panel data set containing both loan and internal rating data from the banks’ complete business loan portfolios over the period 1997-2000. We compute the credit loss distributions that each rating system...
URI: http://hdl.handle.net/2108/201
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