Today, loans are an integral part of the economy, necessary for its normal functioning. For industrial enterprises, this is an opportunity to obtain means of production with periodic payment of their value. For trading companies - covering the deficiencies in working capital. For individuals - the opportunity to receive funds for personal use.
Credit risk
In all financial credit relationships, there are two interacting parties - the borrower and the lender. And in this case, the lender bears certain financial risks. But the lender takes a conscious risk, receiving losses in the event of default on financial obligations by the borrower.
Considering the credit financial relationship between enterprises and banks, one can see a significant relationship between the entities. On the one hand, the bank that issued the loan to the enterprise bears the risk of non-repayment of the debt by its borrower on time and in full. On the other hand, a company that has free funds and deposits them in its bank accounts may lose them completely in the event of a bank liquidation. In addition, the company may receive less profit on the interest rates of the deposit. For example, a bank knows that a company is a stable depositor and does not offer a high interest rate on a new deposit, which the company could receive in another bank when placing free funds there.
Since credit risks exist for the entire lending period, lenders use various methods to assess them.
Assessment and minimization of credit risks
The most common and proven risk assessment method is scoring. When working with this method, a scoring card is drawn up. In this card, on the basis of the borrower's questionnaire, assessment points are set, which form a threshold value for making a decision: to credit the applicant or refuse. When using the scoring method, it is necessary to take into account the regional economic level and the conditions in which the borrower lives.
Often, when considering applications for a loan, they are guided by the so-called method of "manual assessment" of credit risks. When using this method, the time for issuing a loan may be delayed, since the bank employee needs to manually check the information from the applicant's questionnaire against various bases of the bank. And this is the internal history of the bank, the base of credit histories. This method is safer for the lender in relation to risks.
When conducting a credit risk analysis, the amount of the largest loss that a lender can incur during the entire term of the agreement with the maximum specified probability is determined. Potential lenders can take advantage of the recommendations of the Basel Risk Assessment Committee.
When using these methods, you can significantly reduce the risks of loans. Also, to minimize risks, it is possible to recommend the introduction of insurance premiums for lending, setting limits for banking operations, and reserve funds in case of losses.
