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Assessing Korean Households' Credit Risk: Stress Tests with Household Level Data (in Korean)

Author

Listed:
  • Young Il Kim

    (Korea Development Institute)

  • Joo Hee Yoo

    (Korea Development Institute)

Abstract

We assess Korean households' credit risks by employing stress tests. We analyze the impact of household credit risk on the stability of financial institutions and identify vulnerable indebted households by household characteristics based on their resilience to shocks. Financially distressed households are identified by using cash flows and net asset holdings at the household level. Based on these criteria, households at risk, debt at risk, and expected loss rate are computed and utilized as indicators of financial soundness. We examine how these measures are affected under macroeconomic stress scenarios. The result shows that banks are resilient to some extent whereas the non-bank financial institutions are vulnerable to shocks because the borrowers from the non-bank financial institutions tend to have relatively weak cash flows and equity(net asset) buffer. In addition, the credit risks of indebted households are analyzed by household characteristics such as income, age, occupation, and region.

Suggested Citation

  • Young Il Kim & Joo Hee Yoo, 2013. "Assessing Korean Households' Credit Risk: Stress Tests with Household Level Data (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 19(2), pages 59-95, June.
    • Handle: RePEc:bok:journl:v:19:y:2013:i:2:p:59-95
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    Citations

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    Cited by:

    1. Kim, Young Il & Kim, Hyoung Chan & Yoo, Joo Hee, 2016. "Household Over-indebtedness and Financial Vulnerability in Korea: Evidence from Credit Bureau Data," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 38(3), pages 53-77.
    2. Kim, Young Il, 2015. "Household Debt Vulnerability and Directions for Risk Management," KDI Focus 41, Korea Development Institute (KDI).
    3. Hyun Hak Kim, 2022. "A dynamic analysis of household debt using a self-organizing map," Empirical Economics, Springer, vol. 62(6), pages 2893-2919, June.
    4. Kim, Young Il & Hwang, Min, 2016. "Household Debt and Consumer Spending in Korea: Evidence from Household Data," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 38(4), pages 23-44.
    5. Kim, Ji Seob, 2015. "Analysis of the Structural Changes in Household Debt Distributions by Householder Age in Korea and in the US," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 37(4), pages 21-54.

    More about this item

    Keywords

    Household debt; credit risk; stress test; financial stability; expected loss rate;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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