Credit Risk Implications in Norwegian Banks: A Comparative Analysis of The Internal Rating Based and Standardised Approaches
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- Master of Science 
Objective: This study aims to evaluate the implications of the Internal Ratings-Based approach on credit risk in comparison to the Standardised Approach among Norwegian banks. The adoption of the IRB approach was initially aimed at offering banks a more flexible tool for credit risk assessment. By including bank-specific factors into the analysis, this study seeks to determine the potential benefits and drawbacks of the approaches. In relation to the proposed revision of the Basel III framework, this study aims to offer insight into the necessity of such revisions in the context of the Norwegian banking sector. Methods: Various proxies have been used to measure credit risk at the parent bank level. The main variables under observation include Non-Performing Loans, Loan Losses, and Z-Scores. The period under study spans from 2014 to 2022, using quarterly accounting data. High dimensional fixed effects regression, including regional and time fixed effects, have been used to analyse the data. The analysis involved the use of a test variable, the IRB dummy variable, and several bank-specific control variables, including size, regulatory capital, profitability, lending rate, revenue diversification, transferred portfolios to credit subsidiaries, and the corporate loan ratio.
Masteroppgave(MSc) in Master of Science in Business, Accounting and Business Control - Handelshøyskolen BI, 2023