Credit Risk Determinants of Commercial Bank: A Look From Texas Commercial Banking Industry

Abstract

This paper examines and estimates the credit risk of commercial banks from Texas banking industry and finds that dominants factors influencing the credit risk of commercial banks are (i) bank’s expectation towards higher ROA and ROE (ii) larger ratio of long term loans in bank assets portfolio, LTERMTA and (iii) bank size, LNTA. Regulatory capital requirement, REGCP, Real estate loans as a percentage of total loans (RESLL) and total assets (REALTA) are not significant factors. The paper suggests some policy prescription to improve the credit risk management of commercial banks.