Let's examine ways to protect against credit risk

Diversification is the allocation of credit portfolio among a wide range of borrowers, which are distinguished from each other both on individual characteristics (amount of capital ownership), and by fields of activity, geographical feature (the borrowers are located in different regions, geographical areas, countries with different economic, environmental conditions). Diversification by geographic indicator fully available bank, because it is small in scope. This method allows you to soften the impact of climate and weather conditions, political and economic turmoil affecting the financial condition of the borrower. The use of sectoral diversification allows allocate credit resources in many sectors of the economy. The only problem is choosing the most profitable and least risky industries. On the classification of loans by sectors of the economy can be said that the profitable industries today is commerce (which is growing rapidly) and industry (lending to these sectors constitute almost 77% of all loans). [26] An important here is the continuous monitoring of selected areas so that when the economic downturn to transfer loans into more profitable. The use of portfolio diversification means of dispersal of credits between different categories of borrowers, from individual to individual and well-known large companies. benefits in terms of profitability are the loans to small business because they are limited in the choice of loans, and so the bank can dictate their own rules, but they are also the most risky. Category: Risks in Banking of