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Exposure to Real Estate Losses: Evidence from the US Banks
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Author/Editor: |
Igan, Deniz | Pinheiro, Marcelo |
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April 1, 2009 |
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Electronic Access: |
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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Summary: We implement a three-step procedure to assess the extent of exposure to real estate in commercial banks. First, we demonstrate interest rates and income to be the major determinants of delinquency. Then, we adopt a stress testing approach to calculate the impact of any adverse changes in these determinants. This suggests that a 1.3 percentage point increase in mortgage interest rate leads to a 20 percent decrease in a typical bank's distance to default. Finally, we look at the cross-sectional differences and indentify the banks with rapid loan growth along with high cost-income ratio as the most vulnerable.
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Order a print copy
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Series: |
Working Paper No. 09/79 |
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Subject(s): |
Banking sector | United States | Housing | Commercial banks | Consumer credit | Commercial credit | Real estate prices | Payments arrears | Economic models |
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Author's keyword(s): |
Residential and Commercial Real Estate
| Delinquency
| Distance to Default.
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Published: |
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April 1, 2009 |
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Format: |
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Paper |
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Stock No: |
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WPIEA2009079 |
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Pages: |
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33 |
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Price: |
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US$18.00 (Academic Rate: US$18.00 )
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