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Could corporate credit losses turn out higher than expected?

Author

Listed:
  • Mikael Juselius
  • Nikola Tarashev

Abstract

Credit risk forecasts should provide information both about losses in a baseline scenario ("expected losses") and about the potential for extreme outcomes ("unexpected losses"). Policy support measures have kept debt service costs low during the pandemic, thus underpinning benign baseline forecasts of corporate credit losses up to 2024. High indebtedness, built up when the pandemic impaired real activity, suggests increased tail risks: plausible deviations from the baseline scenario feature ballooning corporate insolvencies.

Suggested Citation

  • Mikael Juselius & Nikola Tarashev, 2021. "Could corporate credit losses turn out higher than expected?," BIS Bulletins 46, Bank for International Settlements.
    • Handle: RePEc:bis:bisblt:46
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    References listed on IDEAS

    as
    1. Benoit Mojon & Daniel Rees & Christian Schmieder, 2021. "How much stress could Covid put on corporate credit? Evidence using sectoral data," BIS Quarterly Review, Bank for International Settlements, March.
    2. Mathias Drehmann & Anamaria Illes & Mikael Juselius & Marjorie Santos, 2015. "How much income is used for debt payments? A new database for debt service ratios," BIS Quarterly Review, Bank for International Settlements, September.
    3. Drehmann, Mathias & Juselius, Mikael, 2014. "Evaluating early warning indicators of banking crises: Satisfying policy requirements," International Journal of Forecasting, Elsevier, vol. 30(3), pages 759-780.
    4. Claudio Borio & Philip Lowe, 2002. "Assessing the risk of banking crises," BIS Quarterly Review, Bank for International Settlements, December.
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    Citations

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    Cited by:

    1. Mikael Juselius & Nikola Tarashev, 2022. "When uncertainty decouples expected and unexpected losses," BIS Working Papers 995, Bank for International Settlements.
    2. Giraldo, Iader & Turner, Philip, 2022. "The Dollar Debt of Companies in Latin America: the warning signs," National Institute of Economic and Social Research (NIESR) Discussion Papers 534, National Institute of Economic and Social Research.
    3. Mikael Juselius & Nikola Tarashev, 2022. "When uncertainty decouples expected and unexpected losses," BIS Working Papers 995, Bank for International Settlements.
    4. repec:zbw:bofrdp:2022_004 is not listed on IDEAS
    5. Catherine Casanova & Bryan Hardy & Mert Onen, 2021. "Covid-19 policy measures to support bank lending," BIS Quarterly Review, Bank for International Settlements, September.
    6. Bank for International Settlements, 2022. "Private sector debt and financial stability," CGFS Papers, Bank for International Settlements, number 67, december.

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    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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