Determining and predicting correlation of macroeconomic indicators on credit risk caused by overdue credit

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The banking system guarantees the economic strength of the country. Its sustainability is due to the sustainability of the credit portfolio. Therefore, scientific research on banking risks is always relevant. Basel recommendations and central bank regulations provide risk minimization in case of default of borrower by creating risk reserve, but the high range of macroeconomic factors creates a basis for creating credit risk. The model, which determines the risk factors, may be structurally the same, but the quality of the influence of factors is different in various countries. The influence of macroeconomic factors is particularly evident in developing countries. The impact of economic factors in different countries is high in GDP of these countries. The article focuses on determining the influence of macroeconomic factors on credit risk of systematic banks in Georgia. The coefficients of individual macroeconomic indicators are calculated by using Pearson’s correlation. The credit risk ratio is taken from the bank’s overdue credits and credit portfolio ratio. Based on the correlation coefficients obtained, the expected risk of shock changes is calculated.

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    • Figure 1. Credit risk of the Bank of Georgia (overdue credit 90+)
    • Figure 2. Y – Credit risk, X – Unemployment rate
    • Figure 3. Y – Credit risk, X – GDP
    • Figure 4. Y – Credit risk
    • Table 1. The result of the calculation of Pearson’s correlation