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Households’ Default Probability: An Analysis Based on the Results of the HFCS
In an environment where the Portuguese banking system has a high exposure to the household sector, identifying the households’ characteristics associated with a higher probability of default on loans is of great importance to monitor the outlook for credit risk and its consequences for the stability of the financial system. This article estimates a probability of default for households which depends on their economic and socio-demographic characteristics and takes into account the existence of shocks that adversely affected their financial situation. The estimated probability is used to characterize the distribution of credit risk for some household’s groups, which differ on their situation in the debt market, and for different types of loans. The analysis uses data from the Household Finance and Consumption Survey which took place during the second quarter of 2010.