Journal of Applied Finance & Banking

Rating models and its Applications: Setting Credit Limits

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  • Abstract

    In regulatory and competitive environments increasingly tight, banks have been forced to constantly improve their internal rating models. Despite the increased supply models and statistical approaches that has been proposed to them, the answer to the question: how much to lend ? remains always at the discretion of the credit risk manager. The aim of this paper is to propose a statistical approach that allows an estimation of the maximum facility bank overdraft (limits) that the credit risk manager may allow coorporate and to identify the determinants of this limits.