Banks’ provisions for non-performing loans were correspondingly low. [19] Extensive economic policy measures are one reason why the correlation between economic developments and credit risk has loosened. On top of that, banks’ risk models were not “trained” to provide information on future risks in a scenario of higher interest rates, sectoral adjustments and high macroeconomic uncertainty.
In other words, banks would be well advised to calculate future credit risk based on the most adverse scenarios possible and use any discretion they have to ensure that less meaningful data from the past do not distort the models’ results. Another aggravating factor is that structurally necessary adjustments do not simply become apparent at the level of a shift between sectors.