The collective revelation of credit institutions as regards the imminence of specific risks materialising, which often follows long periods of underestimating probable losses, can trigger a broad-based financial delev...The collective revelation of credit institutions as regards the imminence of specific risks materialising, which often follows long periods of underestimating probable losses, can trigger a broad-based financial deleveraging via an overly high upsurge in banks＇ risk premiums vis-a-vis the dynamics of fundamentals underlying loan repayment capability. In this context, this paper seeks to investigate the banking sector＇s internal mechanisms that might bring about a negative spiral of credit risk by building a model for the interaction between the increase of the risk premium and that of net interest income and provisioning rate. Statistical results confirm that a higher risk premium is one of the major determinants of credit default in Romania and its excessive widening could affect financial stability in Romania.展开更多
文摘The collective revelation of credit institutions as regards the imminence of specific risks materialising, which often follows long periods of underestimating probable losses, can trigger a broad-based financial deleveraging via an overly high upsurge in banks＇ risk premiums vis-a-vis the dynamics of fundamentals underlying loan repayment capability. In this context, this paper seeks to investigate the banking sector＇s internal mechanisms that might bring about a negative spiral of credit risk by building a model for the interaction between the increase of the risk premium and that of net interest income and provisioning rate. Statistical results confirm that a higher risk premium is one of the major determinants of credit default in Romania and its excessive widening could affect financial stability in Romania.
