Deep Neural Networks for Behavioral Credit Rating

Entropy

Zvonko Kostanjčar¹  Lovre Mrčela¹  Andro Merćep¹  Matija Birov² 

[1] Laboratory for Financial and Risk Analytics, Faculty of Electrical Engineering and Computing, University of Zagreb, 10000 Zagreb, Croatia;Member of Intesa Sanpaolo Group, Privredna Banka Zagreb, 10000 Zagreb, Croatia;

关键词: deep neural network;    credit rating;    credit risk assessment;    behavioral model;   

DOI  :  10.3390/e23010027

来源: DOAJ

【 摘 要 】

Logistic regression is the industry standard in credit risk modeling. Regulatory requirements for model explainability have halted the implementation of more advanced, non-linear machine learning algorithms, even though more accurate predictions would benefit consumers and banks alike. Deep neural networks are certainly some of the most prominent non-linear algorithms. In this paper, we propose a deep neural network model for behavioral credit rating. Behavioral models are used to assess the future performance of a bank’s existing portfolio in order to meet the capital requirements introduced by the Basel regulatory framework, which are designed to increase the banks’ ability to absorb large financial shocks. The proposed deep neural network was trained on two different datasets: the first one contains information on loans between 2009 and 2013 (during the financial crisis) and the second one from 2014 to 2018 (after the financial crisis); combined, they include more than 1.5 million examples. The proposed network outperformed multiple benchmarks and was evenly matched with the XGBoost model. Long-term credit rating performance is also presented, as well as a detailed analysis of the reprogrammed facilities’ impact on model performance.

【 授权许可】

Unknown