Credit portfolio managers must be able to identify the interdependencies between exposures in a portfolio and be able to relate credit risk to tangible portfolio effects on which action could be taken. To these ends, this paper draws on the macroeconometric vector error correcting model (VECM)...

Active credit portfolio management is becoming a central part of capital and credit management within the banking industry. Stimulated by the Basel II capital accord the estimation of risk sensitive credit and capital management is central to success in an increasingly competitive environment....