Credit risk

Credit operations are part of the banking business and determine the main income of the bank. But such operations are so-called credit risk. Credit risk exists in all activities where the outcome depends on the counterparty, the issuer or borrower. It occurs every time the bank provides funds, accepts the obligation to provide them, invest or otherwise runs the risk of them under the terms of the actual or prospective transaction, regardless of where the operation is displayed - on the balance sheet or off balance sheet. Credit risk can arise for many reasons, but in any case for the bank, it means a threat of loss or partial loss of funds made available for use. It is important that the bank found out what causes this? Threat, because in the future will depend on its profitability on transactions related to loans. Credit risk factors can have both external nature in relation to the bank, and internal. Factors that are external in nature, related to the possibility of implementing credit risk because it does not depend on the activity of the personnel department of the bank loan. The borrower can not repay the loan, despite the good faith of the bank employees. In contrast, factors that are internal in nature, associated with errors that allowed the staff at the registration of loan documents, errors in assessing the creditworthiness of the borrower, omissions and errors in job descriptions laid down in the Rules themselves lend. Category: Management Operations Commercial Bank | Tags: Credit risk