What Can Credit Vintages Tell Us About Non-Performing Loans?

Serie

• Borradores de Economia

Resumen

• Using Colombian credit vintage data, we decompose the non-performing loans into one component that captures the evolution of the payment capacity of borrowers, and other component that captures changes in the credit risk taken by the financial system at the time of loan disbursement. We use intrinsic estimators and penalized regression techniques to overcome the perfect multicollinearity problem that the model entails. We find that these two type of components have evolved differently over time, and that good economic conditions and loose financial conditions improve the payment capacity of borrowers to meet their obligations, and in turn, they tend to coincide with the financial system engaging in riskier loans. Finally, we advocate the use of this methodology as a policy tool that is easy to apply by financial and economic authorities that dispose of a constant flow of credit vintage information. Through it, they will be able to identify the origin of the credit risk materialization and curb the risk taken by the financial system.

autores

• Gamba Santamaría, Santiago
• Melo-Velandia, Luis Fernando
• Orozco Vanegas, Camilo

fecha de publicación

• 2021

Área temática

• C13 - Estimación: generalidades
• C20 - Modelos uniecuacionales; variables simples: Generalidades
• G21 - Bancos; Instituciones de depósito; Instituciones Microfinancieras; Hipotecas

Enfoque geográfico

• Colombia  Country
• South America  Continent

Líneas de investigación

• Cartera en mora
• Cosechas de crédito
• Estimadores intrínsecos
• Regresiones penalizadas

Issue

• 1154