scholarly journals Global Portfolio Credit Risk Management: The US Banks Post-Crisis Challenge

Mathematics ◽  
2021 ◽  
Vol 9 (5) ◽  
pp. 562
Author(s):  
Pawel Siarka
Keyword(s):  
Risk Management ◽  
Distribution Function ◽  
Credit Risk ◽  
Factor Model ◽  
Capital Requirements ◽  
Total Loss ◽  
Credit Risk Management ◽  
Loan Portfolios ◽  
Risk Management Process ◽  
Market Factors

This paper addresses the problem of modeling credit risk for multi-product and global loan portfolios. The authors presented an improved version of the Basel Committee’s one-factor model for capital requirements calculation. They examined whether latent market factors corresponding to distinct portfolios are always highly correlated within the global portfolio and how this correlation impacts total losses distribution function. Historical losses of top-tier banks (JPMorgan Chace, Bank of America, Citigroup, Wells Fargo, US Bancorp) were analyzed. Furthermore, the estimation of the correlations between latent market factors was conducted, and its impact on the total loss distribution function was assessed. The research was performed based on consolidated financial statements for holding companies - FR Y-9C reports provided by the Federal Reserve Bank of Chicago. To verify the improved model, the authors analyzed two distinct loan portfolios for each bank, i.e., credit cards and commercial and industrial loans. They showed that the correlation between latent market factors could be significantly lower than one and disregarding this conclusion may lead to overestimating total unexpected losses. Hence, capital requirements calculated according to the IRB (Internal Ratings Based Approach) formula as a sum of individual VaR999 estimates may be biased. According to this finding, the enhanced one-factor model seems to be more accurate while calculating unexpected total loss for global portfolios. The authors proved that the active credit risk management process aiming to lower market factors’ correlation results in less volatile total losses. Therefore, financial institutions could be more resistant to macroeconomic downturns.

scholarly journals Effects of Basel III Framework on Capital Adequacy of Commercial Banks in Kenya

2016 ◽  
Vol 1 (1) ◽  
pp. 61
Author(s):  
Kevin Kombo ◽  
Dr. Amos Njuguna
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Banks ◽  
Financial Stability ◽  
Safety Net ◽  
Capital Requirements ◽  
Capital Adequacy ◽  
Basel Iii ◽  
Credit Risk Management ◽  
Management Staff

Purpose:The purpose of the study was toassess the effects of Basel III framework on capital adequacy requirement in commercial banks in Kenya. The study sought to address the following research questions: why are capital adequacy regulations important in commercial banks in Kenya? What challenges are commercial banks facing in the implementation of capital adequacy requirement? What measures have commercial banks taken to ensure compliance with the capital adequacy requirement?Methodology:A descriptive survey design was applied to a population of 43 commercial banks operating in Kenya. The target population composed of the 159 management staff currently employed at the head offices of the various commercial banks in Kenya. The population was composed of Senior, Middle and Junior or Entry level Management staff. A sample of 30% was selected from within each group.Primary data was gathered using questionnaires which were dropped off at the bank’s head offices and picked up later when the respondents had filled the questionnaires. Descriptive analysis was used to analyze quantitative data while content analysis was used to analyze qualitative data.Results:The findings show that capital adequacy requirement is important in commercial banks because it leads financial stability in the Kenyan economy, improves credit risk management techniques as poor credit risk management requires more capital and leads to reduced vulnerability to liquidity shocks due to the sound capitalization policies being implemented under the Basel III framework. Findings also revealed that capital adequacy affected the balance sheet structure of the commercial banks in Kenya.Unique contribution to theory, practice and policy: The study recommends that banks should continue the pursuit of various strategies to ensure that they are in compliance with Basel III requirements and the Central Bank of Kenya’s Prudential Guidelines. The staff of this committee should be drawn from mainly the finance, legal, compliance and treasury departments. Compliance with the capital requirements will lead to a safety net for all commercial banks as the additional capital will act as a cushion that absorbs losses in case of distress in the commercial banking sector.

Research on credit risk management of small and medium-sized enterprise in the industrial and commercial bank of China

2021 ◽  
pp. 002072092098350
Author(s):  
Ning Yida ◽  
Luo Hehua
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Commercial Bank ◽  
Management System ◽  
Organization Structure ◽  
Practical Significance ◽  
Electronic Business ◽  
Credit Risk Management ◽  
Risk Management System ◽  
Risk Management Process

As the largest commercial bank in China, ICBC is a typical representative of the electronic business of SMEs. However, the electronic business for SMEs has credit risks and needs to continuously strengthen the credit risk management for SMEs. By analyzing the organization structure, system and process of credit risk management for SME in ICBC, this paper attempts to conclude that there are flaws on credit risk organization structure, credit risk management process and system is not sound enough, and there are omissions before, on and after the loan, in addition, risk management awareness is not strong. In view of the above problems, this paper puts forward some countermeasures and suggestions to improve the organization structure of credit risk management, perfect the credit risk management system of SME, strictly carry out risk control before, during and after loans, and strengthen the consciousness of risk management. Researching the credit risk management system for SMEs in ICBC has a great educational and practical significance, for other commercial banks establishing and improving their risk management system.

scholarly journals Applying ontologies to data integration systems for bank credit risk management

2018 ◽  
Vol Special Issue on Scientific... ◽  
Author(s):  
Jalil Elhassouni ◽  
Mehdi Bazzi ◽  
Abderrahim Qadi ◽  
Mohamed Haziti
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Bank Credit ◽  
Management Process ◽  
Credit System ◽  
Special Issue ◽  
Credit Risk Management ◽  
Integration Model ◽  
Risk Management Process ◽  
Credit Granting

Special ISSUE VSST 2016 This paper proposes an ontological integration model for credit risk management. It is based on three ontologies; one is global describing credit risk management process and two other locals, the first, describes the credit granting process, and the second presents the concepts necessary for the monitoring of credit system. This paper also presents the technique used for matching between global ontology and local ontologies.

scholarly journals The Impact of Credit Risk Management on the Moroccan Commercial Banking Sector

2021 ◽  
Vol 11 (4) ◽  
pp. 5713-5724
Author(s):  
Fatima Bellaali ◽  
Abdelhamid Al Bouhadi
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Management Practices ◽  
Banking Sector ◽  
Commercial Banking ◽  
Credit Risk Management ◽  
Loan Portfolios ◽  
Market Requirements ◽  
The Impact ◽  
Different Sources

The study aimed to analyze the credit risk management practices that the commercial banking sector in Morocco is committed to and their impact on the banking sector.Accordingly, the study reached many conclusions about the importance of applying the mechanism of transferring risks into credit opportunities in the market, which can be achieved through diversifying the bank’s revenue schemes in an optimal manner and correct compatibility with market requirements, which allows the bank to use different sources of interest and fees granted from other areas of service that provided by the Bank, rather than focusing primarily on loan portfolios. In addition, the study highlighted the importance of the relevant specialist within the Bank to deal with more macroeconomic research. Designed for market-based economies, other than adopting credit trend analysis alone, therefore, depreciation of bank assets comes from a variety of market drivers, which have a fundamental role in influencing the credit capabilities of the bank.

scholarly journals Incorporating Sustainability Considerations into Lending Decisions and the Management of Bad Loans: Evidence from Greece

2018 ◽  
Vol 10 (12) ◽  
pp. 4728 ◽  
Author(s):  
Theodosios Anagnostopoulos ◽  
Antonis Skouloudis ◽  
Nadeem Khan ◽  
Konstantinos Evangelinos
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Financial Intermediaries ◽  
Management Approach ◽  
Credit Risk Management ◽  
Critical Question ◽  
Risk Management Process ◽  
Wide Range ◽  
Bad Loans ◽  
Lending Decisions

The financial sector’s role is undeniably crucial in modern economies. Yet, this sector often attracts criticisms. Of particular concern is the negligence of proper credit risk management, which may undermine (macro)economic stability. The absence of appropriate policies (industry and institutional) draws attention to firm performance indicators, which remain short-sighted in assessing the provision of sustainable risk management. The sector and, in particular, financial intermediaries (FIs) must confront the complex task of assessing their impacts and, in doing so, actively endorse enabling conditions towards sustainable development. Our paper offers managerial insights from a wide range of financial intermediaries (FIs) currently active in Greece. We address the critical question of how FIs incorporate sustainability in credit risk management. A mixed-methods approach of online questionnaires and semi-structured interviews was utilized to link and investigate managerial perspectives of sustainability risks and their impact on bad loans. The executives’ responses revealed that sustainability risk management indeed exists, but it has yet to penetrate core processes. It does provide strong motives over new management techniques and contributes to a higher level of materiality of FI’s core operations. Nonetheless, there is still plenty of room for improvement before sustainability risk assessments are comprehensively incorporated in all phases of the credit risk management process so that a robust sustainability management approach underpins FI’s core mission and goals.

scholarly journals Credit Risk Management of Consumer Finance Based on Big Data

2021 ◽  
Vol 2021 ◽  
pp. 1-10
Author(s):  
Huibo Wang
Keyword(s):  
Risk Management ◽  
Big Data ◽  
Credit Risk ◽  
Consumer Finance ◽  
Credit Risk Management ◽  
Healthy Development ◽  
Risk Management Process ◽  
Core Concepts ◽  
Credit Scores ◽  
Definition Of

In recent years, China’s consumer finance has developed rapidly, but the foundation is unstable, and the industry has serious problems of violent competition, excessive credit, and fraud. Therefore, we should attach great importance to the healthy development of consumer finance, especially the management of its credit risk. The application of big data credit investigation can provide early warning of potential risks and prevent the risk of excessive credit investigation. This paper starts with the definition of basic core concepts, such as traditional credit investigation, big data credit investigation, and consumer finance, analyzes the performance and causes of consumer finance credit risk, and combs in detail the relevant theories of the application of big data credit investigation in consumer finance credit risk management. The application of big data credit investigation has optimized the risk management process of consumer financial institutions, deepened the concept of Internet consumer finance, improved the risk management system, created a diversified credit information system, and strengthened the innovation of Internet consumer finance products and services. For example, credit scores provide the most intuitive quantification of consumer credit risk. For consumers with different levels of credit scores, different credit approval processes can be matched. For customers with high scores, the work process can be simplified without affecting the work results. It can reduce the workload of employees by 20% and increase the accuracy of customer credit risk prediction by 16%.

Management of Credit Activities and their Effects on Commercial Banks’ Credit Risk in Indonesia

2013 ◽  
Vol 6 (1) ◽  
Author(s):  
EMANUEL KRISTIJADI ◽  
UBUD SALIM ◽  
MADE SUDARMA ◽  
DJUMAHIR DJUMAHIR
Keyword(s):  
Risk Management ◽  
Moral Hazard ◽  
Credit Risk ◽  
Commercial Banks ◽  
Management Strategies ◽  
Process Quality ◽  
Management Process ◽  
Credit Risk Management ◽  
Risk Management Process ◽  
Risk Management Strategies

The financial institution in any nation has a potential role in the economy but it can also create the risks taken by the borrowers. This study seek to test the effect of policy and credit risk management strategies, quality of human resources, information technology intensity, and moral hazard of lending staff on the credit risk management process. This is positivist approach with qualitative information to support quantitative analysis using 83 respondents of commercial banks (excluding foreign banks), collected by means of questionnaires related to respondents’ perceptions with Likert scale. The analysis was done by using Generalized Structured Component Analysis (GSCA). Results showed that credit risk management olicies can improve credit risk management strategy formulation; credit risk management strategies improves credit risk management process quality; the intensity of high IT improves credit risk management process quality; the human resource quality can less improve credit risk management process quality; moral hazard less improves credit risk management process quality; and, the high quality of credit risk management processes can reduce credit risk. It can be concluded that credit risk management process has a significant effect on credit risk. The credit risk management policy and strategy, information technology, and moral hazard are needed to support such process.Keywords: Business and Management, credit risk, Generalized StructuredComponent Analysis (GSCA), Indonesia Commercial Banks, Indonesia

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