The impact of market risk on default rates

An applied study of a sample of Iraqi commercial banks for the period 2005-2017

Abstract

     The measure of market risk is the potential loss to banks, which is now used as a tool to measure, manage and control the market risk that can be faced by the bank. As we know, the ultimate goal of banks is to increase profitability and reduce the loss that can be exposed, This study has been linked to the concept of market risk by default in repayment due to the importance of the role of credit in achieving the objectives of the bank in the long term. The study adopted in its application on a set of reports and financial statements published for a group of banks listed in the Iraqi market for securities (8) banks (Bank of Baghdad, Commercial Bank of Iraq, Middle East Bank, Iraqi Investment Bank, Iraqi National Bank, Credit Bank, Sumer Commercial Bank, Gulf Commercial Bank). The study used a set of financial and statistical means to achieve its objectives. The study was used to verify the normal distribution of data (Kolmogorov-Smirnov) and found that it is subject to normal distribution. The study also used the analysis of correlation and regression of the study variables and hypothesis testing using a set of statistical methods. The study reached a number of conclusions, the most important of which is the absence of a relationship of significant statistical significance and correlation between market risk, default rates and market risk. The study presented a number of recommendations, the most important of which is the need for the management of banks to study the risks other than market risks such as credit risk, financial risks, etc., and their impact on default rates.