Loan size and predictability of portfolio losses in Argentina

Abstract

The main objective of our work is to construct, through the use of bootstrapping techniques, distributions of portfolio losses of small and large loans in Argentina. Annual data is used, covering the period 1999-2005, from the Debtors Central of the Central Bank of Argentina on 580,000 records. Compared to large loan portfolios, small loan portfolio loss distributions are shown to be more symmetrical, more concentrated around the mean, and more stable over time. Likewise, they have higher expected losses until 2002, but a lower average after that date. Of particular interest to our analysis, small loan portfolios appear to generate lower unexpected losses. In turn, the expected loss exhibits a strong countercyclical behavior in both subsets after the 2002 crisis, but not in the previous period. In contrast, unexpected losses remain stable during the crisis in small loan portfolios, but increase considerably in large loan portfolios. Some pertinent policy implications emerge from the analysis.

JEL classification: G21 ; G32