Credit insurance is used by banks in two ways

1) mortgage insurance or kautsiynogo. In this case, the insured is the debtor, subject to the insurance liability of the bank that had provided credit for the timely and full payment of principal and interest on it, and 2) delkredernogo insurance. In this case, the policyholder - the bank, and the object of insurance - the responsibility of all or part of borrowers to the bank for the timely and full repayment of the loan and interest thereon, ie, financial risk of bank losses due to a failure to perform or improper performance of its borrowers loan covenants. In this case, the amount of insurance premiums paid by the bank, can be taken into account when setting interest rates for credit. Advantage of the insurance risk of the loan portfolio over the reservation is that the amount of compensation is not limited to the negative effects generated by contributions insurance fund, as determined by the value of the insured object, the size of the premium and, accordingly, the sum insured. Under the provision should be understood as the types and forms of guaranteed obligations of the borrower to the lender to return the loan in case of default by the borrower of its potential. To provide are: 1. The pledge of assets and property rights. Collateral may be: property, which according to Ukrainian legislation may be alienated by the pledgor, and to which may be levied: material assets, securities, deposits, real estate. Property rights, ie the right to use property, including objects of intellectual property rights. The pledge means that the bank has the right to default on its obligations to obtain satisfaction from the value of the mortgaged property prior to other creditors. Thus, the pledge as a way to reduce credit risk - is, first, to specify and strengthen the rights of accounts requirements, and secondly - the right to benefits. 2. Guarantee, in which the bank, another financial institution, insurance company, which is the general name of "guarantor", the lender guarantees the performance of the debtor's debt to the contract. Considered as a guarantee of the guarantor to the bank, which in the legal field is independent of other contractual obligations. Category: Management Operations Commercial Bank | Tags: Credit Insurance