Credit Risk in Two Institutional Regimes: Spanish Commercial and Savings Banks

Posted: 8 Mar 2003

See all articles by Jesus Saurina Salas

Jesus Saurina Salas

Banco de España

Vicente Salas-Fumás

University of Zaragoza - Department of Business Administration and Organization

Abstract

Although credit risk is an important factor that financial institutions must cope with, the determinants of bank problem loans have been little studied. Using panel data, we compare the determinants of problem loans of Spanish commercial and savings banks in the period 1985-1997, taking into account both macroeconomic and individual bank level variables. The GDP growth rate, firms, and family indebtedness, rapid past credit or branch expansion, inefficiency, portfolio composition, size, net interest margin, capital ratio, and market power are variables that explain credit risk. However, there are significant differences between commercial and savings banks, which confirm the relevance of the institutional form in the management of credit risk. Our findings raise important bank supervisory policy issues: The use of bank level variables as early warning indicators, the advantages of bank mergers from different regions, and the role of banking competition and ownership in determining credit risk.

Keywords: Credit risk, problem loans, commercial and savings banks

Suggested Citation

Saurina Salas, Jesus and Salas-Fumás, Vicente, Credit Risk in Two Institutional Regimes: Spanish Commercial and Savings Banks. Available at SSRN: https://ssrn.com/abstract=382966

Jesus Saurina Salas

Banco de España ( email )

Madrid 28014
Spain

Vicente Salas-Fumás (Contact Author)

University of Zaragoza - Department of Business Administration and Organization ( email )

Dr. Cerrada 1
5005 Zaragoza
Spain
+34 976 761803 (Phone)

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