On measures for illustrating credit risk assessments: the case of heat maps, risk matrices and cubes

Credit risk is the most important of banks’ financial risks. As far as the largest Swedish banking groups are concerned, 60 per cent of their assets consist in lending to the public. Consequently, measures for mitigating credit risk are of significant importance for banks in their risk management. During the financial crisis, credit risk in the financial system has become of focal importance for central banks to assess and manage. A precondition for central banks being able to promote a safe and efficient payment system is that they have executed the necessary assessment of credit risk in the system. The assessment, in turn, requires access to relevant data. Further, as a result of banks’ credit portfolios becoming increasingly diversified in terms of both asset types and geography the ability to assess, illustrate, and communicate credit risk has become more complex and challenging.