MultivariateStatisticalApproachtoCreditRiskAssessment.docVIP

MULTIVARIATE STATISTICAL APPROACH TO CREDIT RISK ASSESSMENT AND VALUATION FOR LOANS Professor Ante, ROZGA, Ph.D. University of Split, Faculty of Economics Matice hrvatske 31, 21000 Split, Croatia Tel: ++385 21 430649, fax: ++385 21 430701 E-mail: rozga@efst.hr Ivica, KLINAC, Msc. Econ. Hypo-Alpe Adria Bank, Croatia Andrije Hebranga 3, 23000 Zadar Tel: ++385 21 023 230580 E-mail: iklinac@yahoo.co.uk Roberto, ERCEGOVAC, Ph.D. Splitska banka Societe Generale Group E-mail: roberto.ercegovac@efst.hr Tel: ++385 91 219 1022 ABSTRACT Bad approach to credit risk exposure in the United States and some other countries has led to financial crisis and economic depression all over the world, yet without signs of recovery. Very loose conditions for banking loans produced exaggerated financial activity and therefore, as a consequence, impossibility to get loans paid back. In Croatia, banks used much stronger criteria when allowing loans with much better performances then in the U.S., which are the main reason that we do not have financial crisis as many other countries. Still, in this paper we want to get statistical multivariate approach to get it better. Authors analyzed the sample of retail portfolio of Croatian banks classified by the loan structure and borrower selected attributes, and wanted to challenge this classification by statistical methods. Multivariate statistical approach is used to get the most significant variables which contribute to classification of the loans as risky or not (default or not). There were several groups of applicants due to loan repayments, but we have made only two groups: those who repay their loans regularly and those who get some problems (delayed or not paying at all). We used following variables as predictors: economic development of the region where subject live, age of the subjects, percentage of the loans already repaid, interest rate and the currency in which the loans are tied (Croatian kuna, Euro, US dollar and Swiss fra