THE IMPACT OF CREDIT RISK MANAGING ON BANK PROFITABILITY AN EMPIRICAL STUDY DURING THE PRE-AND POST-SUBPRIME MORTGAGE CRISIS: THE CASE OF SWEDISH COMMERCIAL BANKS

Abstract

This study empirically investigates the impact of credit- risk exposure management on bank profitability of the major commercial banks in Sweden with special emphasis on the financial crisis of 2008. We empirically test whether risk managing in ways to substantially reducing the probability that defaulting loans and how the Swedish bank may keep out credit crisis with their credit activities. The purpose of the study was to find out the main issues arising from the bank lending activities that have had a serious impact on the banking industry and the financial instability. Furthermore, the paper explores whether credit exposure manage procedures are changed during financial crisis. We find that successful practices of credit risk management in Swedish banks are likely to improve the availability of bank credit.