In the practice of Russian and foreign banks, various approaches are used to determine the credit risk of individuals, starting with subjective assessments by credit experts of commercial banks and ending with automated risk assessment systems. Most foreign banks in their practice use two main methods for assessing the creditworthiness of individuals, these include:

Expert systems for assessing the creditworthiness of borrowers;

Point systems for assessing customer creditworthiness.

Expert assessment systems

This system allows banks to make a balanced assessment of both the personal qualities of a potential borrower and his financial condition. In international practice, considerable attention is paid to this method; a monitoring network is actively developing to analyze the credit history of potential borrowers.

For example, in the US, a loan officer almost always asks a local or regional credit bureau about the client's credit history. There are over two thousand credit bureaus in the United States that have data on a large number of individuals who have ever received loans, the history of repayment of these loans, and the credit rating of borrowers.

Point systems for assessing customer creditworthiness

These are methods that are created by banks based on factor analysis. This system uses an accumulated database of “good”, “satisfactory” and “poor” borrowers, which makes it possible to establish a criterion level for assessing the borrower.

Scoring systems have the advantage that they allow a large volume of loan applications to be analyzed quickly and with minimal effort, thereby reducing operating costs. In addition, they represent a more efficient way of assessing applications, i.e. may be carried out by credit inspectors who do not have sufficient experience. This allows you to reduce losses from issuing bad loans.

The use of point systems for assessing the creditworthiness of clients is a more objective and economically sound method of decision-making when issuing loans than expert assessments.

For example, the creditworthiness of an individual can be quickly assessed using the Durand credit scoring system.

Scoring systems usually use discriminant models or similar in essence logistic regression method. These models use several variables that add up to a numerical score for each potential borrower.

In essence, scoring individuals is a method for assessing the borrower’s creditworthiness, based on various characteristics of clients, for example: income, age, profession, marital status, etc. As a result of the analysis of factors, an integrated indicator is calculated, which gives an idea of ​​the degree of creditworthiness of the borrower, based on the points scored during the analysis. And as a result, depending on the score, a decision is made to issue a loan and its parameters or to refuse to provide a loan.

Russian banks in their practice use similar assessment methods, for example, in Sberbank of the Russian Federation, the solvency of the borrower is determined as follows:

K pl = D*K*T

Where,
D - average monthly income for the last 6 months minus all mandatory payments (income tax, contributions, alimony, compensation for damage, etc.);
K is a coefficient depending on the value of D, i.e. the indicator is equal to K = 0.3 for D in the equivalent of up to $500, K = 0.4 for D from 501 to $1000, K = 0.5 for D over $2000. Income in dollar equivalent is determined by recalculating ruble income at the rate of the Central Bank of the Russian Federation established at the time the applicant applied to the bank;
T - loan term, months.

It would not be entirely correct to consider ways assessing the creditworthiness of individuals, based only on the methodology of Sberbank of the Russian Federation, because Russian banks have laid a significant methodological basis on this issue over more than a ten-year period of development. In terms of further development of this topic, we will consider a point system for assessing the creditworthiness of an individual borrower, which takes into account the most significant factors that determine the borrower’s ability to fully and on time fulfill its obligations.

This system is based on a two-level assessment system.

At the first stage, a bank employee asks the borrower to fill out a test questionnaire. The test questionnaire is used to preliminary assess the possibility of providing a loan to the borrower. When filling out the test questionnaire, the client is not required to provide passport data; only general information about the borrower, place of work, property, income and expenses is required.

Based on the results of the borrower filling out the test questionnaire, the number of points scored by the borrower is calculated and a protocol is signed to assess the possibility of receiving a loan. If the total score is less than 30, then the protocol indicates that the borrower does not have sufficient capabilities to obtain a loan. The protocol, together with the completed test questionnaire, is sent to the borrower.

The next step to carry out a comprehensive analysis of the creditworthiness of an individual is to assess the quality of loans provided to individuals.

The maximum size of the loan provided (S) to an individual borrower is calculated in two stages.

1. The maximum loan size is determined based on the client’s solvency:

S = (1+N%*100) / T

Where, N% is the annual interest rate; T - loan term, months.

2. The resulting value is adjusted taking into account the provided loan repayment collateral, information provided in the opinions of other bank divisions, and the balance of debt on previously received loans.

Loans to individuals are assessed according to the following criteria:

• character of the client;
• financial capabilities of the client;
• sufficiency of the client’s unmortgaged property;
• loan security;
• lending terms.

Each criterion includes indicators that form the assessment according to the criterion. Each indicator is assessed in points, the score according to the criterion is equal to the sum of the scores of the indicators included in it. The loan quality rating is equal to the sum of the ratings of all criteria.

Comparing the expert and point rating systems, I would like to make the following clarification.

The use of qualified experts by banks to assess the creditworthiness has several disadvantages:

• their opinion is somehow subjective;
• people cannot quickly process large amounts of information;
• Paying highly qualified specialists involves significant costs.

In this regard, banks are increasingly showing increased interest in risk assessment systems that would minimize the participation of experts and the influence of the human factor on decision making.

In turn, the scoring system is a mathematical model with which the bank, based on data on the clients’ credit history, can determine the likelihood of a potential borrower not repaying the loan.

The last two judgments form the following problem: most Russian commercial banks either do not take into account the reason for the borrower’s bad credit history (perhaps due to reasons beyond his control), or, based on the client’s bad credit history, make a decision not in favor of the potential borrower. This problem is often invisible to bank employees, but has a noticeable impact on clients.

To summarize, we note that all of the above methods are of a formalized nature, so when assessing the creditworthiness of individuals, the professionalism of bank employees plays a huge role.

Various methods for assessing creditworthiness differ from each other in the composition of the factors used in assessing the overall credit rating of the borrower, as well as in the approaches to assessing each parameter of the model and the degree of significance of each of them. Unfortunately, the composition of factors in the model is not universal for all banks and countries, which, in turn, does not allow the global banking community to exchange statistics and improve their scoring systems.

At the same time, the complexity and ambiguity of assessing the creditworthiness of individuals determines the use of various methods and approaches. Moreover, it is important to note that in order to achieve the best results, the most preferable, in our opinion, is the use of both mathematical models and expert approaches in combination.

In conclusion, we note that at present, when approving methods for assessing the creditworthiness of private borrowers, it is important to check how well the chosen methods are adapted to the current situation in the country, for example, how thoroughly the sources of financial difficulties for potential borrowers in the past are analyzed. It is important to approach with interest issues related to a negative credit history, relatively short work experience at the last place of work, etc., because the reason may not be the borrower’s dishonesty, but an unfavorable combination of circumstances, which, regardless of the borrower’s will, led to negative in terms of obtaining a new loan the consequences.

The borrower's creditworthiness is the ability to complete a transaction to provide value on the terms of repayment, urgency and payment, or, in other words, the ability to complete a credit transaction. In the process of managing credit risk, commercial banks use a set of criteria and indicators, the consideration and analysis of which allows us to draw a conclusion about the level of creditworthiness of the borrower. The specific set of indicators characterizing the activities of an enterprise in different banks is not the same and changes in the process of development of credit relations.

The client’s creditworthiness in global banking practice appears as one of the main objects of assessment when determining the feasibility and forms of credit relations. The ability to repay a debt is associated with the moral qualities of the client, his art and occupation, the degree of investment in real estate, the ability to earn funds to repay the loan and other obligations.

The list of elements of the borrower's creditworthiness and the indicators that characterize them may be broader or shorter depending on the purposes of the analysis, types of loans, loan terms, and the state of the bank's credit relations with the borrower. The optimal or acceptable values ​​of such indicators should be differentiated depending on the borrower’s activities, specific terms of the transaction, etc. Today, there are several basic methods for assessing the creditworthiness of clients. Systems differ from each other in the number of indicators that are used as components of the overall assessment of the borrower, as well as in different approaches to the characteristics and priority of each of them.

There are the following methods for assessing the creditworthiness of individuals:

1) scoring models;

2) methodology for determining solvency;

3) underwriting.

The bank applies each model for different types of lending and adjusts it individually. Scoring models are used mainly when providing loans for the purchase of goods (express lending) and when issuing credit cards.

Scoring is a mathematical (statistical) model with the help of which, based on the credit history of existing clients, the bank determines how likely it is that a particular client will repay the loan on time. Scoring identifies those characteristics that are most closely related to the reliability or, conversely, to the unreliability of the client.

The credit scoring technique is an assessment in points of characteristics that make it possible to determine with sufficient reliability the degree of credit risk when providing a consumer loan to a particular borrower. The most significant indicators for predicting credit risk may be indicators such as age, number of dependents, profession, income, cost of housing, etc.

The advantages of scoring models are obvious:

1) reducing the level of loan non-repayment, speed and impartiality of decision-making;

2) &possibility of effective management of the loan portfolio;

3) lack of long-term training for credit department employees;

4) the opportunity to conduct an express analysis of a loan application in the presence of the client.

However, despite the positive aspects, the use of credit scoring is associated with a number of difficulties.

One of them is that the determination of evaluation characteristics is made only on the basis of information about those clients to whom the bank has already provided a loan.

Another and most significant problem is that scoring models are built on the basis of a sample of the “earliest” customers. Taking this into account, bank employees have to periodically check the quality of the system and, when it deteriorates, develop a new model.

It should be noted that about ten characteristics are taken from the application form filled out by the borrower for evaluation, and the remaining data is stored in a statistical database for further updating and scoring analysis.

Currently, Russian banks evaluate such characteristics as income, number of dependents, ownership of a car (at the same time, they distinguish between a domestic and foreign car, always taking into account the period that has passed since its release), the availability of a land plot (its area and distance from city ​​center), work experience, position, education.

Undoubtedly, today these are the main parameters by which the degree of creditworthiness of an individual can be determined. However, continuous adjustment of the scoring methodology will make it possible to expand and change the list of assessed characteristics, and those clients who today fall into the group of unreliable borrowers, in the subsequent analysis of lending activities, may be classified as borrowers with low loan defaults.

A more complex and thorough assessment of the borrower is used when issuing loans to individuals for urgent consumer needs. These are, as a rule, medium-term loans for the purchase of expensive things, payment for any services and work. An example would be the purchase of expensive furniture, tuition fees, financing home renovations, etc. In this case, many large commercial banks determine the borrower's solvency on the basis of documents from the place of work on income and the amount of deductions, as well as according to the questionnaire. The result is calculated as the average monthly income minus all mandatory payments, adjusted by an adjustment factor and multiplied by the loan term. Based on the amount received, the maximum loan size is calculated. The resulting value is adjusted taking into account influencing factors: the provided loan collateral, information contained in the conclusions of the security service and the legal department of the bank, the balance of debt on previously received loans.

To assess a client's solvency, credit inspectors need to analyze a huge number of documents. The list of them is quite large and includes about fifteen items. Their obligatory provision by the client, on the one hand, limits the circle of potential borrowers of the bank, and on the other, allows the formation of a loan portfolio of higher quality and reduces credit risk.

One of the advantages of this technique is the use of special formulas and adjustment factors that make it possible to simplify the work of bank credit department employees and calculate the solvency of a potential borrower. However, indicators for it should be obtained in each specific situation separately, and the result should not be considered as something that clearly indicates in favor or against issuing a loan. After all, even if at the time of consideration of the loan application the client’s financial indicators are at an acceptable level, one should not forget that the risk of non-repayment of the loan still remains, since it is in principle impossible to completely eliminate it. The indicators will only help to assess the degree of credit risk and, unfortunately, this technique does not allow us to predict the borrower’s position in the future.

When providing mortgage lending to individuals, the main way to reduce a bank's credit risk is to carry out underwriting of the borrower, which involves assessing the likelihood of repayment of the loan, which involves analyzing the solvency of a potential client in the manner established by the bank, as well as making a positive decision on an application for a mortgage loan or refusing to provide a loan. .

Operations for mortgage lending to individuals in the bank are carried out by a fairly wide range of banking departments: legal service, security service, securities department, housing construction department, etc. This indicates the degree of complexity and labor-intensiveness of the underwriting procedure, the course of which each bank develops independently, choosing criteria assessments and terms of mortgage loans.

The most important point in the underwriting process is assessing the client's solvency in terms of the ability to make timely loan payments. To perform this assessment, information on the borrower's employment and income, as well as his expenses, is consolidated. After this, a conclusion is made whether he will be able to repay the loan. At the same time, a conclusion is issued whether the pledged property is sufficient collateral for a loan or not.

When providing mortgage lending, bank employees include additional quantitative and qualitative characteristics in the methodology for determining the borrower’s creditworthiness and the amount of credit risk.

Quantitative characteristics include the ratio of the borrower's total monthly obligations to total family income for the same period, as well as the adequacy of funds (based on maintenance costs).

Qualitative characteristics include the borrower's income, employment stability, credit history, loan collateral, etc.

Evaluating the underwriting methodology, we can conclude that a systematic approach to the analysis of the borrower is used here. The positive side of the methodology is the ability of the bank to develop an individual approach to any potential borrower, within which the required number of characteristics will be taken into account. The disadvantage of this assessment is the labor intensity of its implementation, which requires special qualifications of bank employees. Most banks prefer to compensate for credit risk by increasing interest rates. Other methods are also used, the use of which does not require much time and labor.

It should be noted that an understanding of the feasibility and relevance of using more advanced methods most often arises among those banks in which lending to individuals is implemented as a mass service.

If the bank plans to roll out a large-scale program, then in order to succeed in the market in the context of constantly tightening competition and, as a result, decreasing profitability, it is necessary to look for ways to reduce operating costs and minimize risks.

A prerequisite here will be the correct construction of the mechanism that will carry out this activity. Figuratively speaking, you need to create a kind of conveyor belt, consisting of a certain number of employees interacting with borrowers and among themselves according to certain clearly defined rules and algorithms. Such algorithms include methods for analyzing applications and making decisions on issuing a loan.

So, consumer lending operations are one of the most profitable items in the banking business. This source can generate a significant portion of the net profit of a credit institution, which is transferred to reserve funds and used to pay dividends to the shareholders of a commercial bank.

Consumer lending operations are promising and attractive for commercial banks, and, therefore, it becomes important to develop a set of measures to reduce the level of credit risk and manage it. Credit risk management is based on identifying the reasons for the borrower's inability or unwillingness to fulfill its obligations and determining methods to reduce the level of risk. The goal of credit risk management is to reduce the likelihood of a borrower's failure to fulfill its obligations under a loan agreement and to minimize the financial losses of a commercial bank in the event of loan default.

economic sciences

• Fattakhova Diana Nadimovna,
• Bashkir State Agrarian University

• INDIVIDUAL
• SCORING METHOD
• BORROWER
• CREDITABILITY

This article discusses the method of scoring the creditworthiness of an individual, as well as the methodology for assessing creditworthiness based on financial indicators of the borrower's solvency using a specific example

• Cryptocurrency leaders 2018, their impact on the financial market and the real sector of the economy

The essence of credit scoring is that all the data that the client enters when filling out the proposed questionnaire has a score. This technique allows you to clearly assess all the characteristics of a potential borrower.

Let's consider the methodology for scoring a client's creditworthiness at the Bank using the example of a hypothetical citizen Sergei Dmitrievich Ivanov, who applied to the bank for a cash loan, currently issued at a rate of 16 percent per annum, for an amount of up to 1 million rubles. for a period of 1 to 3 years without the requirement of collateral or guarantee. The desired term of using the loan is 1 year, the requested amount is 100 thousand rubles.

To simplify things, we will make the following assumptions regarding citizen S.D. Ivanov, confirmed by the documents provided by citizen Ivanov:

• age - 28 years old, has no family or dependents, lives alone;
• has an official place of work at a trade enterprise as a leading specialist in the supply service, with the exception of income from the place of work - has no other sources of income;
• the legal capacity of citizen S.D. Ivanov has been confirmed;
• Ivanov S.D. had not previously applied to the bank to obtain a loan;
• served in the ranks of the Armed Forces of the Russian Federation;
• the average monthly income for the last 6 months is 37 thousand rubles, documented;
• monthly expenses exceed 50% of declared income, there are no fixed payments (rent, education, alimony, etc.);
• owns an apartment, the market value of which is the equivalent of 40 thousand US dollars, has not made real estate transactions or other major transactions for the purchase and sale of property in the last 5 years.

The minimum requirements that, in accordance with the methodology, must

correspond to the borrower (main borrower and guarantor) are listed in table 1 and can be changed within the framework of any loan product by the Bank's Credit Committee.

Table 1. Mandatory requirements for borrowers

Age from 21 to 60 years
Permanent registration on the territory of the lending bank branch
Labor activity on the territory of a lending bank branch
Officially formalized employment relationship with the employer, documented
Work experience of at least 1 year
No negative credit history
Monthly income level reflected in the borrower’s application form is at least 350 US dollars
For female applicants, the age of the child, if any, is at least six months
For male applicants under 27 years of age, no problems with service in the Armed Forces

Next, the data specified by the borrower is processed and then a borrower score is formed, which consists of points. Based on the number of points, the bank employee makes a conclusion and attaches them to the rest of the documents, only after that the bank makes a decision to grant or refuse a loan.

If we rely on the data of citizen S.D. Ivanov, we can conclude that the loan will be approved for him, since he meets all the mandatory requirements of the bank, has no credit debts, receives a stable salary and owns an apartment.

Thus, scoring does not answer the question of why the borrower does not pay. He identifies those characteristics that are most closely related to the unreliability or, conversely, the reliability of clients of a certain age, a certain profession, education, the same number of dependents, etc. This is the discriminatory nature of scoring: a person who, according to formal criteria, is close to the group with a bad credit history will most likely not be able to get a loan.

Methodology for assessing the creditworthiness of an individual based on financial indicators of his solvency

Solvency indicators are based on data on the income of an individual and the degree of risk of losing this income. When issuing a one-time loan, a commercial bank calculates the solvency of an individual borrower on the basis of data on average monthly income for the previous six months, which is determined using certificate 2 - personal income tax.

As we already know, the average monthly income of citizen S.D. Ivanov over the last six months is 37 thousand rubles. Next, we must adjust income by a coefficient that differentiates depending on the amount of income (from 0.3 to 0.6).

A coefficient of 0.3 is assigned to a citizen with an average monthly income in the equivalent of up to $500, a coefficient of 0.4 - for income in the equivalent of $501 to $1,000, a coefficient of 0.5 - for income in the equivalent of $1,001 to $2,000, and the coefficient is equal to 0.6 - for income equivalent to over $2000.

To find out which coefficient should be applied to the income of citizen S.D. Ivanov, it is necessary to convert his average monthly income into the equivalent of the US dollar.

For this, 37,000 / 59.1128 (US dollar exchange rate according to the Central Bank of the Russian Federation as of March 16, 2017) = $625.922. Therefore, we apply a coefficient of 0.4.

P = D × K × I,

P = 37,000 * 0.4 * 12 = 177,600 rub.

Thus, in 12 months, citizen S.D. Ivanov can repay a loan in the amount of 177,600 rubles.

So, citizen S.D. Ivanov is a solvent borrower and may well qualify for approval of a loan from the bank. Many factors play in its favor and are taken into account when assessing the creditworthiness of an individual:

• has a stable income of over $350, documented;
• owns an apartment, the equivalent value of which is 40 thousand US dollars;
• has no credit debts;
• meets all mandatory requirements of the borrower;
• The solvency of citizen S.D. Ivanov is 177,600 rubles per year.

Having analyzed two methods for assessing the creditworthiness of individual borrowers, we can conclude that the scoring method for assessing the creditworthiness of an individual borrower is the most popular among banks in Russia and in banks in other countries. First of all, this is due to the fact that, using this method, banks can cover more detailed information about the borrower: biography; credit history; property he owns. The method of assessing the creditworthiness of an individual based on financial indicators of his solvency is also an integral part of assessing the creditworthiness of the borrower, since the ability to repay the loan is calculated based on his income. However, this method is not as popular among banks, unlike scoring.

Bibliography

1. Ihsanova, G.R., Gallyamova, T.R. US credit cards - emergence and development / Ihsanova G.R., Gallyamova T.R./ Current issues of accounting, economic analysis and audit: theory and practice. Ufa: Bashkir State Agrarian University Publishing House, 2009. pp. 32-36.
2. Valieva, A.R., Gallyamova, T.R. Consumer lending in commercial banks / A.R. Valieva, T.R. Gallyamova / Socio-economic problems of development of the agricultural sector of the economy and ways to solve them // Collection of articles of the All-Russian scientific and practical conference dedicated to the 85th anniversary of the Bashkir State Agrarian University. Ufa: Bashkir State Agrarian University Publishing House, 2015. pp. 100-104.
3. Gallyamova, T.R. Tax control as one of the factors of financial security of the state / T.R. Gallyamov, I.E.Trishkanova, B.N. Khosiev, K.E. Gurtsiev // News of Mountain State University, 2015.T.52. No. 4. pp. 275-280.
4. Gallyamova, T.R. Standardization and methodological aspects of management audit in agricultural organizations / T.R. Gallyamov. – Ufa: Publishing House of the Bashkir State Agrarian University, 2005. – 44 p.
5. Khasyanova S.Yu. “Credit analysis in a commercial bank” [Text]: textbook. allowance / S.Yu. Khasyanova. - M.:INFRA-M, 2017. - 196 p.
6. Website of the Central Bank of the Russian Federation [Electronic resource]. – Access mode: https://www.cbr.ru/, free. - Cap. from the screen.

The importance of assessing customer creditworthiness for managing credit risks of banks

Creditworthiness assessment occupies the most important place in the credit risk management system.

A competent assessment of creditworthiness allows

• determine whether the borrower is able to service his debt,
• calculate the most acceptable debt burden for a given borrower,
• assess the necessary security for the return of borrowed funds.

Depending on the borrower’s credit history and the bank’s previous experience of cooperation with this client, the creditworthiness assessment can be more or less detailed and thorough.

Example 1

Thus, in the absence of overdue payments, the creditworthiness of enterprises that have received a line of credit from a given bank, as well as clients who have the opportunity to overdraft with a debit card or bank credit card, is not assessed every time.

Assessing creditworthiness is important for both legal entities and individuals, however, given that legal entities, as a rule, attract loans for significantly larger amounts than individuals.

Note 1

An error in assessing the creditworthiness of even one borrower can lead to a deterioration in the financial position of the bank itself.

Assessing the creditworthiness of individuals

When lending to individuals, reducing the bank's credit risk and possible losses is possible only with an accurate assessment of the borrower's ability to fulfill his loan obligations; the most important thing here is an effective assessment of creditworthiness.

Typically, there are methods for assessing the creditworthiness of an individual:

• scoring;
• underwriting;
• analysis of the borrower's financial situation.

Scoring based on the client’s existing credit history makes it possible for the bank to determine, using mathematical methods, the likelihood of repaying the loan on time. Here we use concepts that are related to the reliability (unreliability) of the client.

Scoring methods and models allow you to reduce the risk of loan non-repayment and make decisions on issuing a loan quickly and impartially. They also allow you to effectively manage your loan portfolio. There is no need to spend a lot of time training employees of the credit department; it is even possible to conduct an express analysis of the loan application in the presence of the client.

When mortgage lending to individuals, the borrower's underwriting is used, the most important thing is the assessment of timely payment of loan payments.

Typically, to analyze the creditworthiness of a potential borrower, the following are requested: a copy of documents identifying the borrower and confirmation of the client’s income: a certificate in form 2-NDFL, a copy of the tax return in form 3-NDFL.

Bank specialists analyze the solvency of an individual borrower based on data on average monthly income and the amount of deductions for the previous six months, as well as information based on a questionnaire.

At the moment, the most universal method of assessing creditworthiness is the method of assessing the client’s financial situation.

Methods and techniques for assessing the creditworthiness of legal entities

In the process of lending to borrowers, Russian banks use different methods to determine the creditworthiness of a potential and actual borrower. In recent years, the system created by the Association of Russian Banks has been considered the most effective and accurate.

This methodology includes the following criteria that a potential responsible and solvent borrower must satisfy:

• solidity – this indicator characterizes the responsibility of the organization’s management, as well as the timeliness and completeness of repayment of previous loans;
• ability is a set of data on the production and financial activities of an enterprise, its position in the market and competitiveness;
• profitability – characterizes the possibility of making a profit when investing in a specific project;
• reality – characterizes the possibility of a potential borrower realizing his plans;
• validity – the need for the client to confirm the amount of the requested loan with calculations and actual data;
• repayment - the ability to repay the loan at the expense of property (movable and immovable) and other material assets owned by the borrower, if the implemented project does not bring profit;
• the security of the loan not only with property, but also with the legal rights of the borrower.

Note 2

It is very important to study the last four indicators simultaneously with such indicators of the enterprise’s balance sheet as asset turnover, liquidity, solvency, profitability and security.

In each of the listed groups of indicators, the most indicative characteristic of the organization under study is determined, and then statistical data is collected and generated on it.

In practice, most often the assessment and characterization of the borrower’s creditworthiness is based on the calculation and detailed analysis of several groups of financial ratios.

Most often, the solvency and liquidity indicators of the potential borrower are taken into account.

The advantage of the methodology indicated below is that standard values ​​can be calculated for many indicators, and this makes it possible to analyze the organization’s activities taking into account all factors. Not only the current, but also the future state of the enterprise depends on the specifics of the industry.

When calculating financial ratios, you can use various standards (Fig. 1).

Figure 1. Optimal values ​​of coefficients divided by type of borrower. Author24 - online exchange of student work

To improve the efficiency of the creditworthiness assessment process, standard indicators of financial ratios by industry can be calculated for previous years.

Since standards for assessing the borrower’s creditworthiness have not been officially established, the bank’s work is hampered. It is almost impossible to determine whether the borrower is able to repay the loan on time in full or not.

Qualitative and comprehensive analysis is based on information that is very difficult to quantify. In order to study the solvency of a particular borrower, a lot of information is required, in addition to what the borrower provided for verification, in particular, information from the security service, as well as information from the bank’s database. In addition, it is necessary to assess in aggregate many risks: production, management, industry, shareholder and others.

Before issuing a loan, the bank needs to collect and analyze a lot of data, but this is not done according to universal schemes, but depending on the credit policy of the bank itself, since there are no universal and unified methods in Russia.

Introduction

The problem of timely repayment of loans issued to individuals is relevant for most banking institutions. Its decision largely depends on the quality of the assessment of the creditworthiness of potential borrowers.

In this regard, careful selection of borrowers, analysis of the terms of the loan, constant monitoring of the borrower’s financial condition and ability to repay the loan are one of the fundamental components of the financial well-being of credit institutions.

Creditworthiness analysis in a large number of banks is carried out by experts who rely mainly on their experience and intuition, which can lead to the introduction of subjective considerations that do not have sufficient grounds into the decision. In a real situation, analysts' opinions often differ, especially if controversial issues that have many alternative solutions are discussed.

The situation is complicated if the credit institution does not have regulatory documents regulating the procedure for ascertaining the client’s ability and intentions to fulfill the terms of the debt repayment agreement. As a result, subjective factors acquire excessive weight in the assessment: the qualifications and interest of the expert and the resulting incompetent or deliberate interpretation of information, leading to decisions that are detrimental to the bank. The lack of regulations and formalization of the procedure leads to the impossibility of subsequent analysis and reasonable assessment of expert decisions.

When developing methods for assessing the level of creditworthiness of individuals, an approach based on calculating the borrower's rating has become widespread. The basis of this approach is an initial questionnaire, the data of which reflects the socio-economic status and ability of the client to repay the loan on time. The scoring system in this case carries out quantitative, semantic analysis and processing of questionnaire data.

Making changes to the survey questionnaire entails the need for adjustments or significant modernization of the entire system. This circumstance limits the possibility of adapting scoring models to the socio-economic conditions of the region in which the banking structure plans to lend to private clients, as well as to changes in the current economic situation. Therefore, this approach does not allow the development of a universal system for automated creditworthiness analysis.

All of the above confirms the relevance of the topic of the course work.

The object of the study is the activities of OJSC "RGS Bank".

The subject is the procedure for assessing the creditworthiness of individuals.

The purpose of this course work is to study the procedure for assessing the creditworthiness of an individual.

To achieve this goal, the following tasks should be solved:

1) become familiar with the economic content of the concept of creditworthiness;

) study the methodological basis for assessing the creditworthiness of individuals;

) analyze methods for assessing the creditworthiness of individuals;

) consider the possibility of modernizing the process of assessing the creditworthiness of an individual.

) implementation of practical assignments under the “Your Conditions” credit program of OJSC “RGS Bank”.

1. Methodological basis for assessing the creditworthiness of individuals

1 Economic content of creditworthiness

In the context of the transition to market relations, economic approaches to lending are changing. An important criterion for granting loans is the borrower’s creditworthiness.

The borrower's creditworthiness is usually understood as the ability to repay the loan debt. Its assessment is the bank’s assessment of the borrower from the point of view of the possibility and feasibility of providing him with a loan. It determines the likelihood of timely repayment and interest payments.

The definition of this concept does not indicate what debt is meant, for what type of loan and for what period. The definition is quite universal, but in real banking practice, the creditworthiness of an enterprise is usually understood as its ability to repay loan debt on a short-term or long-term loan.

The study of creditworthiness is carried out for a qualitative assessment of the borrower before deciding on the issuance of a loan and its conditions, determining the client’s ability and willingness to repay the borrowed funds in accordance with the loan agreement.

The study by banks of various factors that may lead to non-repayment of loans, or, on the contrary, ensure their timely repayment, constitutes the content of banking creditworthiness analysis.

When analyzing creditworthiness, banks must decide the following questions: is the borrower able to fulfill his obligations on time, is he ready to fulfill them?

The main purpose of such an analysis is to determine the ability and willingness of the borrower to repay the requested loan in accordance with the terms of the loan agreement. The bank must determine in each case the degree of risk it is willing to assume and the amount of credit that can be granted in the circumstances.

When contacting the bank, the borrower fills out a loan application.

The loan application contains the following basic information:

brief description of the borrower;

purpose of the loan;

information about the types of activities of the borrower;

loan size;

credit term;

intended collateral;

sources of loan repayment;

Contact Information;

passport details;

registration address;

Based on the data received, the bank evaluates the potential borrower.

One of the assessment methods is scoring.

In Russia, commercial banks use different scoring models for assessing the creditworthiness of an individual. When assessing individual indicators in a system of points, at the first stage a preliminary assessment of the possibility of issuing a loan is given, based on the data of the client’s test questionnaire. Based on the results of filling out the questionnaire test, the number of points scored by the borrower is determined and a protocol for assessing the possibility of obtaining a loan is signed. If the sum of points is less than 30, a refusal to issue a loan is recorded in the protocol. If the score is more than 30, at the second stage the risk is assessed more carefully, taking into account additional facts.

The need to use indicators follows from the definitions of the use of one or another selected accounting policy method:

When lending to individuals, loans are typically small in size, which creates a large amount of work to process them and a fairly expensive risk; 0 - for a high-risk profession, 0.16 - other professions;

financial indicators: presence of a bank account - 0.45, availability of real estate - 0.35; availability of an insurance policy - 0.19;

work: 0.21 - enterprises in the public sector, 0 - others;

employment: 0.059 - for each year of work at this enterprise. .

A threshold is also determined, after crossing which a person is considered to whom to give or not to give a loan. This kind of problem is solved with great success by one of the “Data Mining” methods - using decision trees. Decision trees are one of the methods of sequential structure, where each object corresponds to a single node that gives a solution.

A tree is built based on historical data. In this case, the class of each of the situations on the basis of which the tree is built is known in advance, i.e. it must be known whether they are in the same node or not. Entropy is zero if the node contains objects belonging to the same class.

The resulting model is used to determine the class (Give/Not give credit) of newly arisen situations (an application for a loan has been received).

If the current market situation changes significantly, the tree can be rebuilt if overdue debt arises. On this basis, a credit history is compiled.

In Russia, maintaining credit histories of borrowers is regulated by Federal Law No. 281-FZ “On Credit Histories,” which defines the conditions for the provision of credit reports and related services.

The Credit Conditions Bureau collects, processes and disseminates information related to the credit history of individual borrowers, information from state authorities, local governments and the Bank of Russia in order to verify information included in credit histories.

Credit history is information that characterizes the borrower’s fulfillment of its obligations under loan (credit) agreements and is stored in the credit history bureau.

A credit history bureau is a legal entity registered in accordance with the legislation of the Russian Federation, which is a commercial organization and provides services for the formation, processing and storage of credit histories, as well as for the provision of credit reports and related services.

2 Methods for assessing the creditworthiness of individuals

Assessing a borrower's credit risk usually means studying and assessing qualitative and quantitative indicators of the borrower's economic situation. Work on assessing credit risk in a bank is carried out in three stages:

The assessment of the client's creditworthiness is carried out on the basis of an analysis that is aimed at identifying objective results and trends in his financial condition.

The main sources of information for assessing the borrower's credit risk are: information provided by the borrower, the experience of other banks with this client, the scheme of the loan transaction, and on-site inspection data.

Qualitative analysis is also implemented in stages, as shown in Figure 1.

assessment of the borrower's risks assumed by the bank

Figure 1 - Stages of qualitative analysis

The borrower's reputation is studied very carefully, and an analysis of the client's credit history, that is, past experience with the client's loan debt, is very important. Information characterizing the business and personal qualities of an individual borrower is carefully studied. The facts or absence of facts of non-payment of loans, etc. are also established. Determining the borrower's creditworthiness is an integral part of the bank's work to determine the possibility of issuing a loan.

Analysis of the borrower's creditworthiness means the bank's assessment of the borrower from the point of view of the possibility and feasibility of providing him with loans, determining the likelihood of their timely repayment in accordance with the loan agreement. For this purpose, various techniques and methods are used.

The analysis of the client’s creditworthiness is based on the collection of the necessary information that most fully characterizes the client, the main goals of the analysis of which are:

identifying the strengths of the applicant's situation;

identifying the weaknesses of a potential borrower;

determining which specific factors are most important for successful loan repayment;

possible risks when lending.

In banking practice, a distinction is made between direct and indirect methods for analyzing the creditworthiness of clients.

Direct methods are used quite rarely. They assume that the amount of points the customer accumulates actually equates to the loan amount for which he is entitled.

Indirect methods are widespread. Their essence is to assign certain weights (scores) to various assessment indicators, and the result of the assessment is to determine the client’s creditworthiness class.

Based on the data obtained, the creditworthiness group of the potential client is determined:

excellent borrower;

insolvent.

However, it is not enough to find out the borrower’s creditworthiness class. It is also important to determine the size and term of the loan to which he is eligible. To do this, use a table of acceptable amounts for issuing consumer loans as a percentage of the client’s annual income.

In the process of analyzing the individual creditworthiness of individuals, it is important to use the credit scoring method very carefully, since especially when issuing long-term loans, the situation during the execution of the loan agreement changes greatly and there may be a serious danger of non-repayment of the loan. If the total amount of points exceeds the amount specified in the model, then the bank provides the borrower with a loan, but if it is lower than the specified amount, then the loan is denied. Usually there is a certain gap between the minimum and maximum points, and when the actual number of points falls within this gap, the bank makes a lending decision based on general economic and legal factors.

It is obvious that the use of point systems for assessing the creditworthiness of clients is a more objective and economically sound decision-making process than the use of expert assessments. The only difficulty is that scoring systems for assessing a client's creditworthiness must be statistically carefully verified, and they require constant updating of information, which may be unprofitable for banks. According to the results of the creditworthiness analysis, the more points the client scores, the higher the level of his creditworthiness.

When analyzing creditworthiness, banks pay special attention to assessing the personal qualities of the borrower. They can request the necessary certificates, including from the borrower’s place of work, and check the accuracy of the information provided in the client’s application form. If the banker identifies inaccuracies in the client’s answers and comes to the conclusion that the potential borrower deliberately misled the bank, then the client is automatically denied a loan.

Equity assessment refers to determining the client's wealth. It is closely related to the assessment of the client's financial capabilities in terms of his ability to repay the loan along with normal day-to-day expenses and other debt obligations. For almost all consumer loans, the client's income is the main source of repayment. Therefore, the bank evaluates the adequacy of the client’s own funds to timely repay the loan after satisfying other claims and then compares this amount with the amount of periodic payments to repay the loan and interest on it.

Scoring

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Figure 2 - Example of a decision tree

The essence of this method is as follows:

1) a tree is built based on historical data. In this case, the class of each of the situations on the basis of which the tree is built is known in advance. In our case, it should be known whether the principal amount and interest were repaid and whether there were any delays in payments. When constructing a tree, all known situations of the training set first fall into the top node, and then are distributed among the nodes, which in turn can also be divided into child nodes. The partition criterion is different values ​​of any input factor. To determine the field by which the partition will occur, an indicator called entropy is used - measure of uncertainty . The field is selected whose partitioning eliminates more uncertainty. The higher the uncertainty, the more admixtures (objects belonging to different classes) are in one node. Entropy is equal to zero if the node contains objects belonging to the same class;

) the resulting model is used to determine the class (Give/Not give credit) of newly arisen situations (an application for a loan has been received);

) if the current market situation changes significantly, the tree can be rebuilt, i.e. adapt to the existing situation.

The study of methods for assessing the creditworthiness of individuals also makes it possible to identify problems that need to be solved at the macro level:

lack of special legislation regulating relations in the field of consumer lending (these relations are regulated by the laws “On Banks and Banking Activities” and “On the Protection of Consumer Rights”);

lack of a credit history system (which allows unscrupulous borrowers to obtain multiple loans from different banks without any verification of their previous loans);

employers still prefer “gray” schemes for paying remuneration to their employees (as a result, the borrower cannot officially confirm the declared level of income, and the bank loses a solvent client);

the absence of a simple mechanism for the bank to repay the loan in the event of the borrower’s insolvency (the cost of such errors is very high: loss of principal, legal and administrative costs, lost time, etc.);

the need for a reliable assessment of a potential borrower (incorrect classification gives rise to the problem of ensuring the repayment of funds by the borrower forcibly);

the lack of registration of pledged property opens up the opportunity for unscrupulous borrowers to sell or re-mortgage the pledged property;

the problem of assessing the real capabilities of guarantors (it is no secret that Russian banks sometimes solve the issue of reducing credit risks by simply transferring them to the borrower’s guarantors).

As you can see, today banks are in a disadvantageous position: they need to develop the consumer lending market, but this process is associated with too high risks, which are often transferred to borrowers, which does not stimulate demand for loans. In such a situation, banks that decide to develop this market must:

have consolidated information about clients, presented in a unified form and periodically updated with information from all branches of the bank (such a repository will serve as a credit bureau);

adapt the borrower classification model for your branches, which will allow you to take into account territorial characteristics and will further reduce risk. At the same time, the risk classification model must be periodically rebuilt taking into account new market trends.

Banks have their own experience for the development of lending to individuals, but the methods underlying them are too passive to adequately respond to market dynamics, and the proposed foreign solutions are too expensive - comparable in price to income from consumer lending in today's form. This is why loans are so expensive and the demand for them is so low. Increasing the reliability of information and reducing the cost of loans will allow us to abandon the practice of transferring risks and costs to borrowers. Then everyone will benefit: both banks and borrowers.

credit scoring risk borrower

2. Practical part

Ivan Borisovich Shevchenko applied to RGS Bank OJSC with a request for a consumer loan for apartment renovation in the amount of 250,000 rubles for a period of 36 months.

After consultation with a bank specialist, he was offered the “Your Conditions” loan program, the parameters of which are shown in Table 1.

Table 1 - Characteristics of the “Your Conditions” loan program

Options	Meaning
Loan amount, rub
Loan term, months
Interest rate % per annum
Security	Not secured
Repayment method	Annuity payments
Delivery method	To a bank card
Purpose of the loan	Apartment renovation
Loan currency
Borrower's documents for granting a loan
Special conditions	Salary project client
Conditions for early repayment

After the borrower completed the application form and provided all the necessary documents, the decision to issue a loan was approved at an annual rate of 14 percent.

Repaying the loan and paying interest using annuity payments. The loan is provided by crediting a deposit opened at the bank with the issuance of a bank card.

Full early repayment is carried out on the date stated by the client, partial early repayment is allowed on the date stated by the client.

No collateral is required and there are no program fees.

1) give a complete description of the loan;

2) list the documents required to provide a loan

) fill out the borrower's questionnaire;

) draw up a loan agreement;

) calculate the repayment schedule;

) make accounting entries for issuing a loan, creating a reserve, calculating interest, receiving (depositing) the first and second payments to the bank's cash desk (via a terminal), and the third payment through a card of another bank.

Table 2 - Full characteristics of the loan

Classification feature	Type of loan
By timing	Long term
By the nature of the security	Not secured
By delivery technique	One sum
By the nature of the interest rate	Fixed
By method of interest payment	Annuity payments
By loan currency	In national currency
By number of creditors	One bank
By type of borrower	To an individual
By size
According to the form of loan	In cashless form

Table 3 - Payment repayment schedule

Amount of credit
Rate, % per annum
Loan term, months
Loan issue date
Payment number	Month year	payment date	Annuity payment
				To pay off debt	To pay off interest	Remaining debt after payment
	1st year 1st month
	1st year 2nd month
	1st year 3rd month
	1st year 4th month
	1st year 5th month
	1st year 6th month
	1st year 7th month
	1st year 8th month
	1st year 9th month
	1st year 10th month
	1st year 11th month
	1st year 12th month
	2nd year 1st month
	2nd year 2nd month
	2nd year 3rd month
	2nd year 4th month
	2nd year 5th month
	2nd year 6th month
	2nd year 7th month
	2nd year 8th month
	2nd year 9th month
	2nd year 10th month
	2nd year 11th month
	2nd year 12th month
	3rd year 1st month
	3rd year 2nd month
	3rd year 3rd month
	3rd year 4th month
	3rd year 5th month
	3rd year 6th month
	3rd year 7th month
	3rd year 8th month
	3rd year 9th month
	3rd year 10th month
	3rd year 11th month
	3rd year 12th month
	4th year 1st month

Table 4 - Repayment schedule for payments of the 1st and 2nd order according to the timing of interest crediting

maturity date	Total payments	Amortization	Interest
			from 20.01 to 31.01	from 01.02 to 20.02
			from 21.02 to 28.02	from 01.03 to 20.03

Table 5 - Journal of business transactions

	Under the loan agreement, a loan was provided with the opening of a deposit t/c 40817810500160455187 c/c 45506810300160123405 d/c 42301810400160341120
	A reserve for possible loan losses (LLP) has been created 1%
	Loan issued from deposit
	Interest accrued for 11 days of January
	Debited from the deposit account:
		1054-8 1917-8 5572-40	40817 40817 40817	47427 70601 45506
	Interest accrued for 7 days of February
	Redemption of a deposit account from a current account
		1054,8 1917-8 5 919-91	40817 40817 40817	47427 70601 45506
	Interest accrued for 10 days of March
	The amount of RVPS (recovery) is adjusted monthly to pay off the debt

Conclusion

Assessing the borrower's creditworthiness and the decision to issue a loan, made on the basis of the obtained values, is one of the ways to reduce the risk of bank lending.

One of the main tasks solved by a commercial bank during the process of lending to borrowers is the formation of a complete and reliable information base. It serves as the main source of information when analyzing the borrower's creditworthiness.

The analysis of the creditworthiness of individual borrowers is based on consideration of such indicators as:

the amount of initial capital;

the amount of income of the borrower and his family members;

balance of income and expenses of the borrower's family.

The main task of determining the creditworthiness of an individual borrower is to study his financial situation.

Creditworthiness is a comprehensive legal and financial characteristic of the borrower, represented by financial and non-financial indicators, which allows one to assess his ability in the future to fully and within the period stipulated in the loan agreement to pay off his debt obligations to the lender, and also determines the degree of risk of the bank when lending to a specific borrower .

Work on assessing credit risk in a bank is carried out in three stages:

) assessment of qualitative indicators of the borrower’s activities;

) assessment of quantitative indicators of the borrower’s activities;

) obtaining a summary assessment - forecast and forming a final analytical conclusion.

The study of issues related to the analysis of the creditworthiness of commercial bank borrowers allows us to conclude that the methods for analyzing the creditworthiness of individuals are based on generally accepted criteria: the nature of the client, the ability to borrow funds, the ability to earn funds to repay the debt in the course of current activities, the security of the loan, the legal capacity of the borrower. All these criteria determine how to assess the creditworthiness of bank clients.

The assessment of the borrower's creditworthiness by income level is carried out on the basis of data on the income of an individual and the degree of risk of losing this income. Income is determined based on salary certificates or tax returns, after which it is adjusted taking into account mandatory payments and bank risk ratios.

Scoring - used by banks a customer assessment system based on statistical methods. As a rule, this is a computer program into which the data of a potential borrower is entered. . In response, the result is given - is it worth providing him with a loan? . The name scoring comes from the English word score, that is, “account”.

Banks have their own experience for the development of lending to individuals, but the methods underlying them are too passive to adequately respond to market dynamics, and the proposed foreign solutions are too expensive - comparable in price to income from consumer lending in today's form. This is why loans are so expensive and the demand for them is so low.

The purpose of this course work was to study the procedure for assessing the creditworthiness of an individual.

In this work, the following tasks were solved:

1) the economic content of the concept of creditworthiness is considered;

) the methodological basis for assessing the creditworthiness of individuals has been studied;

) methods for assessing the creditworthiness of individuals were analyzed;

) the possibility of modernizing the process of assessing the creditworthiness of an individual was considered.

Thus, we can conclude that well-developed, tested and implemented methods for assessing creditworthiness have a positive impact on the lending process organized by the bank as a whole.

OJSC “RGS Bank” implements the “Your Conditions” loan program; when the borrower applied to the bank for a loan in the amount of 250,000 rubles for 36 months, a decision was made to issue a loan. The drawn up schedule of annuity payments showed that the final repayment amount will be 307,490 rubles 30 kopecks, including interest of 57,490 rubles 30 kopecks.

Bibliography

1. Federal Law of the Russian Federation dated July 10, 2002 No. 86-FZ “On the Central Bank of the Russian Federation (Bank of Russia)” (current version)

Federal Law “On Banks and Banking Activities” dated December 2, 1990 No. 395-1 (current version)

Endovitsky D.A., Bocharova I.V. Analysis and assessment of the borrower's creditworthiness. - “KnoRus”, 2008.

Kushuev A.A. Solvency and liquidity indicators in assessing the borrower’s creditworthiness // Money and Credit, No. 11, 2008. pp. 43-45.

5. O.I. Pyatkovsky, D.V. Lepchugov, V.V. Bondarenko. Scoring system for assessing the creditworthiness of individuals based on hybrid expert systems, Polzunovsky almanac No. 2, 2010, pp. 127-129.