Credit Scoring and Bank Lending Policy in Consumer Loans

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dc.contributor.authorGanopoulou, Mariael
dc.contributor.authorGiapoutzi, Fotinien
dc.date.accessioned2015-03-12T14:47:34Z
dc.date.available2015-09-27T06:05:10Z
dc.date.issued2015-03-12
dc.identifier.urihttps://repository.ihu.edu.gr/xmlui/handle/11544/24
dc.rightsDefault License
dc.titleCredit Scoring and Bank Lending Policy in Consumer Loansen
heal.abstractConsumer loan performance determines the profitability and stability of banks and other lending institutions and screening the loan applications is a key process in minimizing credit risk. Therefore, the primary problem of any lender is to differentiate between “low risk” and “high risk” debtors prior to granting credit. The main method used in assessing credit risks is the credit scoring analysis. The incentive of our research is the recent global financial crisis that erupted in September, 2008 which caused a dramatic reduction of loans granted by financial institutions. In this study a sample set of applications from a large Greek financial institution was focused on in order to estimate a credit scoring model for the consumer loans in Greece during the period 2007-2009. Taking into consideration that during a period of financial distress the banks‟ lending criteria change rapidly, we separated the full data into tree periods and estimated a probit model per year in order to examine the probability of granting a loan changes through years. Moreover, by constructing a bivariate probit model in order to avoid the sample selection effect, we analyzed how the borrower‟s characteristics influence the decision of granting consumer loans and their performance. Concisely, according to our empirical results, we verified that the probability as well as the criteria of granting a loan changes through years especially in periods of financial distress. Last but not least, we demonstrated that the financial institutions‟ lending policies are compatible with default risk minimization and thus it is important for banks in order to minimize default risk, to review the borrowers‟ creditworthiness periodically.en
heal.academicPublisherSchool of Economics, Business Administration and Legal Studies, MSc in Banking and Financeen
heal.academicPublisherIDihu
heal.accessfreeel
heal.advisorNameKosmidou, Kyriakiel
heal.bibliographicCitationGanopoulou Maria and Giapoutzi Fotini, 2010, Credit scoring and bank lending policy in consumer loans, Master's Dissertation, International Hellenic Universityen
heal.committeeMemberNameKosmidou, Kyriakien
heal.committeeMemberNameAlexakisen
heal.committeeMemberNameLevisen
heal.fullTextAvailabilitytrue
heal.keywordDissertations, Academicen
heal.keywordBank loans--Greeceen
heal.keywordCredit scoring systemsen
heal.keywordBank loans--Decision makingen
heal.keywordURI.LCSHCredit Scoringen
heal.keywordURI.LCSHGreek Banks‟ Lending Policyen
heal.keywordURI.LCSHFinancial Distressen
heal.keywordURI.LCSHBivariate Probiten
heal.languageen
heal.licensehttp://creativecommons.org/licenses/by-nc/4.0
heal.publicationDate2010
heal.recordProviderSchool of Economics, Business Administration and Legal Studies, MSc in Banking and Finance
heal.tableOfContentsLIST OF FIGURES ..................................................................................................................................... iv LIST OF TABLES ....................................................................................................................................... iv CHAPTER 1 ................................................................................................................................ 1 INTRODUCTION ..................................................................................................................................... 1 1.1 Introduction ....................................................................................................................................... 1 1.2 Financial Distress and Banking Statistics ........................................................................................... 2 1.3 Procedure of consumer loan applications and the characteristics of the loan ................................. 4 1.4 Objective............................................................................................................................................ 6 1.5 Outline of thesis ................................................................................................................................ 7 CHAPTER 2 ................................................................................................................................ 8 LITERATURE REVIEW ............................................................................................................................. 8 2.1 Banks’ lending decision ..................................................................................................................... 8 2.2 What is credit scoring? .................................................................................................................... 11 2.3 Pros and cons of credit scoring ........................................................................................................ 12 2.4 Variables commonly used in credit scoring ..................................................................................... 14 2.5 Modelling techniques of credit scoring ........................................................................................... 17 CHAPTER 3 ............................................................................................................................. 21 METHODOLOGY ................................................................................................................................... 21 3.1 Research Question........................................................................................................................... 21 3.2 Sample Data..................................................................................................................................... 22 3.3 Description of Variables .................................................................................................................. 23 3.4 Econometric Model ......................................................................................................................... 26 CHAPTER 4 ............................................................................................................................. 31 EMPIRICAL RESULTS AND DICUSSION ......................................................................... 31 4.1 Descriptive Statistics ........................................................................................................................ 31 4.2 Probability of Obtaining a Loan through years 2007-2009.............................................................. 41 4.3 Probability of obtaining a loan and probability of default .............................................................. 48 CHAPTER 5 ............................................................................................................................. 53 SUMMARY AND CONCLUSIONS........................................................................................ 53 5.1 Summary.......................................................................................................................................... 53 5.2 Results of research .......................................................................................................................... 54 5.3 Limitations of research .................................................................................................................... 55 5.4 Recommendations for future research ........................................................................................... 56 BIBLIOGRAPHY .................................................................................................................... 57en
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