Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/251285 
Year of Publication: 
2021
Series/Report no.: 
Working Papers No. 2021-14
Publisher: 
Banco de México, Ciudad de México
Abstract: 
This paper investigates whether three microeconomic loan characteristics are sources of loan default clustering in the Mexican banking sector by employing survival analysis with frailty. Using a large sample of bank loan level data granted to micro, small and medium sized firms from January 2010 to 2018, we test whether classifying loans by the bank's systemic importance, industry or at individual firm level enhances the predictions of loans defaults. Our results show that loans granted by Domestic Systemically Important Banks contribute to the default clustering in micro and small firm loans. This is due to aggregate default rate levels and clusters that are large for these firms loans compared with loans provided to medium-sized firms. These findings have important implications for bank's expected loss management related to the correlated loan default risk.
Subjects: 
Credit risk
Parametric survival analysis
Accelerated Failure Time (AFT) models
Shared frailty models
IFRS 9
JEL: 
C53
C41
C25
G38
Document Type: 
Working Paper
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