Abstract
In this paper, we develop a model for
the rating transition matrices for corporates. These matrices quantify the
credit quality of the business sector and, hence, they are related to the
financial stability and growth of the economy. The main objective is to
estimate how a corporate portfolio behaves under various macroeconomic
conditions and (to show the link between the quality of a corporate portfolio
with macro variables) and to build a new transition matrix based on specific
forecasted macroeconomic variables according to IFRS 9 requirements for the
calculation of ECL. The model has been developed based on historical transition
rates of credit risk assessments provided by ICAP SA and historical values of
various macro factors provided by Hellenic Statistical Authority.
JEL classification numbers: G2, M1.
Keywords: Rating transition matrices,
Credit quality, Business sector, Macroeconomic factors.