Checking account information and credit risk of bank customers

Norden, Lars ; Weber, Martin

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URN: urn:nbn:de:bsz:180-madoc-17804
Document Type: Working paper
Year of publication: 2007
The title of a journal, publication series: None
Publication language: English
Institution: Business School > Sonstige - Fakultät für Betriebswirtschaftslehre
MADOC publication series: Lehrstuhl für ABWL, Finanzwirtschaft, insb. Bankbetriebslehre (Weber) > Working Papers
Subject: 330 Economics
Classification: JEL: G30 G21 G20 ,
Subject headings (SWD): Kreditwesen , Jahresabschlussprüfung , Kreditlinie , Konkurs , Bonitätsprüfung
Keywords (English): Bank lending , Checking accounts , Credit lines , Credit ratings , Bankruptcy
Abstract: We investigate if information from checking accounts may help banks to monitor the credit risk of their customers. Analyzing a unique data set with more than 3 million account-month observations from the period 2002-2006, we find that the credit line usage, the cumulative number of limit violations, the account amplitude and credit payments exhibit an abnormal pattern approximately 12 months before default events. Differentiating by customer type reveals that checking account information is particularly helpful for monitoring small businesses and individuals. We condition the checking account behavior on customers' internal credit ratings and control for credit line changes as well as bank relationship characteristics like the number of accounts, distance and duration.
Additional information: Available at SSRN:

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