Credit risk model for SME loans in the Netherlands

  • Jan Hessel Veurink Jan Hessel Veurink

This paper utilizes data obtained for the health check on the SME
portfolios of Dutch banks by the DNB to estimate a discrete hazard
model to predict the default of a SME loan in the Netherlands.
Furthermore, this paper uses the macroeconomic scenario of the EBA
stress test of 2014 to obtain the macroeconomic impact on SME
defaults.
We found that, ceteris paribus, an increase by 1.3% point in the
interest rate with a GDP growth of 1.5% will translate in an increase
the probability of defaults with 13%.
Furthermore, this will lead to increase from 1.13% to 1.28% in
expected losses expressed in total credit.
Moreover, the effect of this macroeconomic scenario on SME is smaller
compared with the impact on corporates.
Therefore, we conclude that Dutch SME are less dependent on the
macroeconomic environment than corporates.

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