Factor Analysis of Credit Risk in Romania

Abstract

All lending institution is confronted with credit risk and therefore assumes it. So it is necessary to analyze the dynamics of credit risk, the effects on profitability, capital adequacy and, very important, but also difficult to quantify, the general trust in the institution (Berríos M.R., 2013). In order to assess the correlations between credit risk and other financial variables, a database was created in SPSS program packages and the factor analysis was performed. The analysed variables are: Credit Risk Rate, Economic Profitability, Non-performing Loans, Rate of Return, Leverage Effect, Solvency Ratio and Return on Equity (Pinches, 1973). It was established that for Romania for the analysed period are strong correlations between all variables analyzed.

Keywords

• credit risk
• solvency
• equity
• leverage
• principal component analysis