Modeling bank credit losses in extreme events - The impact of intra-organizational factors

Important results from the project

The ability of banks to handle financial crises is very important. Despite capital requirements imposed by the Basel accord the aftermath of the credit crisis in 2007/2008 showed that banks differed in the extent to which they suffered from credit losses. Differences in organizational structure could be a potential explanation to such differences. The purpose of this project is to increase the knowledge of how organizational factors affect the resilience of banks in financial crises. The results show that organizational factors have an impact on banks´ ability to handle crises.

Expected long term effects

The results show that organizational factors affect banks´ ability to handle a financial crisis. For example, our results show the benefits of credit officers involving their informal network contacts in credit granting and monitoring. Such a structure leads to less expected credit losses and faster recovery after a financial crisis.

Approach and implementation

We have analyzed survey data collected in two different investigations: (1): Survey data collected from all employees at one of Sweden´s largest banks during the time period 2007-2011. These data are analyzed using different statistical methods. (2) Survey data collected in 2008 from another bank in Sweden. These data is used to design a so called agent based model.