Credit risk: an agent-based model of post-credit decision actions and credit losses in banks

Authored by S. Jonsson

Date Published: 2012-11

DOI: 10.1057/jos.2012.7

Sponsors: No sponsors listed

Platforms: Java

Model Documentation: Other Narrative Pseudocode Mathematical description

Model Code URLs: Model code not found

Abstract

The credit crisis in 2007/2008 has increased the focus on bank credit risk. This paper uses an agent:based model (ABM) to investigate the impact of bankers' post-credit decision actions on bank credit losses that are induced by lending to corporate clients. The banker agents are modelled according to results obtained from a survey that was distributed to bankers who are permitted to grant credit to firms. The results show that post-credit decision actions have substantial effects on bank credit losses, thus implying that regulators should consider organizational factors as a complement to bank assets when assigning capital requirements to banks. The study also aims to point to a new area of application of ABMs for both researchers and practitioners. Whereas previous research has used ABMs to simulate financial markets, this study suggests that financial organizations could be a vital area of application. Journal of Simulation (2012) 6, 253-266. doi:10.1057/jos.2012.7; published online 23 March 2012

Tags

Agent-based modelling Banking Risk post-credit decision