In some cases, credit risk can develop into a systemic risk, when a violation of credit obligations by one participant leads to a chain of non-payments in the financial market.

Therefore, issues of credit risk management within the framework of regulating the credit policy of commercial banks increasingly began to be considered as of national importance.

To reduce risks, it is necessary to conduct regular analysis of both the creditworthiness of clients and the bank’s own financial stability.

Factors that increase credit risk include:

• - a significant amount of amounts issued to a certain circle of borrowers or industries (i.e. concentration of loans);
• - liberal credit policy (providing loans without providing the necessary information and proper authorization);
• - failure to obtain adequate collateral for a loan;
• - significant amounts issued to interconnected borrowers (relatives, etc.);
• - unstable economic and political situation.

Factors that reduce credit risk are:

• - conservative credit management policy;
• - a scrupulous procedure for approving each loan;
• - establishing the maximum amount of risk per borrower;
• - systematic monitoring and control of risks by management;
• - effective collateral or insurance of loans;

The most important elements of credit risk management are information systems; methods for assessing the creditworthiness of clients and careful documentation, but first and foremost - the definition of clear lending policies and procedures. The Regulations on the lending policy and procedure, along with other issues most important for the bank, are designed to reflect the following key aspects;

lending strategy (types of loans and clients that the bank focuses on; reaction to changes in economic and political conditions in Russia; features of the bank’s approach to risks and determining the price of a loan);

loan portfolio management tasks (target risk weights for the loan portfolio by industry and geography;

maximum concentration of risk across industries and clients; target level of profitability; goals related to portfolio expansion or contraction);

minimum criteria for lending (strength of the financial investment, requirements for providing financial information satisfactory to the bank; sources of debt repayment; collateral requirements; interest rates (commissions); acceptable intermediaries);

loan collateral (types of assets preferred by the bank; determination of cases when a professional or independent assessment of collateral is required; availability of instructions for calculating the net realizable value of collateral based on accounting data; level of collateral value by type of loan);

authorization (definition of the functions of the Credit Committee; limits of authority of committees and individual employees to authorize transactions; minimum content of loan assessments submitted to the Credit Committee; requirements for the distribution of responsibilities);

supervision (the procedure for conducting regular checks by employees of the credit department); requirements for compiling and analyzing periodic reviews (eg, annual) and reviews of borrowers' documentation, collateral, and creditworthiness; periodic inspections and analysis of the loan portfolio (by the internal audit department);

classification of loans (model for classifying loans according to their quality);

policy of reserves for doubtful debts (instructions for creating reserves for doubtful debts);

guarantees and sureties assumed by the bank.

The main areas of regulating the risk of a loan portfolio are the development and implementation of measures to prevent or minimize losses associated with it. This involves creating a credit risk management strategy, that is, the basis for a decision-making policy in such a way as to timely and consistently use all opportunities for the Bank’s development and at the same time keep risks at an acceptable and manageable level.

Risk minimization (otherwise known as risk regulation) is the adoption of measures to maintain risk at a level that does not threaten the interests of creditors and depositors, or the stability of the Bank. This management process includes: forecasting risks, determining their likely size and consequences, developing and implementing measures to prevent or minimize associated losses. To make effective management decisions, it is necessary to most accurately assess and predict the level of credit portfolio risk, since by maximizing and predicting the level of risk in the credit portfolio, the Bank can apply adequate regulatory methods to minimize such risk, and accordingly improve the quality of the Bank’s credit portfolio.

To achieve this goal, it is necessary to solve the following tasks:

• - determine the degree of risk of credit transactions included in the Bank’s loan portfolio;
• - predict the level of risk in the Bank’s loan portfolio in order to adopt adequate methods for its regulation;
• - reduce the share of non-standard loans in the structure of the Bank’s loan portfolio in favor of standard ones by developing an effective mechanism for regulating the risk of the Bank’s loan portfolio;
• - reduce the riskiness of the Bank’s loan portfolio and maintain acceptable ratios of profitability with safety and liquidity indicators in the process of managing the Bank’s assets and liabilities.

The bank must develop certain methods for regulating the risk of the loan portfolio. These methods include:

• - diversification;
• - limitation;
• - reservation.

Diversification of the Bank's loan portfolio is carried out by distributing loans across various categories of borrowers, terms of provision, types of collateral, and by industry.

Diversification of borrowers can be carried out by distributing loans between different groups of the population depending on the purpose of lending (for consumer needs, for housing construction, for education, etc.). Regarding business entities, diversification of the loan portfolio is carried out between large and medium-sized companies, small businesses, public and private organizations, etc. At the same time, the Bank strives to diversify its loan portfolio by placing a larger number of medium-sized loans rather than a small number of large ones.

Diversification of the loan portfolio by maturity is of particular importance, since the level of the Bank’s credit risk, as a rule, increases as the loan term increases.

Diversification of accepted collateral for loans gives the Bank the opportunity to optimally compensate for credit losses at the expense of the borrower’s property. The Bank issues only secured loans, since unsecured or insufficiently secured loans increase the Bank's likelihood of loss.

Industry diversification involves the distribution of loans between clients operating in different areas of the economy. To reduce the overall risk of the loan portfolio, selection of areas is critical. The selection is made based on the results of statistical studies. The best effect is achieved when borrowers operate in areas with opposite phases of business cycle fluctuations. If one area is at a stage of economic growth, then another is experiencing a stage of decline, and over time their positions change to the opposite. Then the decrease in income from one group of clients is compensated by an increase in income from another group, which helps stabilize the bank’s income and significantly reduce risk.

When forming a loan portfolio, the Bank must strive to avoid excessive diversification and concentration. The problem of determining the optimal ratio is solved by setting lending and reservation limits.

By establishing lending limits, the Bank is able to avoid critical losses due to the thoughtless concentration of any type of risk, as well as diversify its loan portfolio and ensure stable income.

Limits can be set by types of loans, categories of borrowers or groups of interrelated borrowers, the most risky areas of lending (providing long-term loans, lending in foreign currency, etc.).

Limitation is used to determine the powers of credit officers of different ranks regarding the volume of loans provided.

Limits are expressed both in absolute maximum values ​​(loan amount in monetary terms) and in relative indicators (ratios, indices, standards).

When minimizing risks, economic standards defined by Instruction of the Central Bank of the Russian Federation N 110-I play a leading role. Failure by the Bank to comply with established economic standards is not permitted.

The most effective method of reducing the level of credit risk in the Bank's portfolio is provisioning. This method is aimed at protecting depositors, creditors and shareholders, while simultaneously increasing the quality of the loan portfolio and the reliability of the Bank. Reservations are carried out in order to prevent losses from non-repayment of debt due to the insolvency of borrowers.

Risk is the probability of net losses or loss of income compared to the predicted option.

Credit risk is the risk of default (non-payment) or late payment on a bank loan.

There are also differences between country credit risk (when providing foreign loans) and abuse risk (consciously predicting non-repayment). Credit risk is part of the financial risk system. There are various risk classifications based on the criteria identified by the authors. Credit risk is always present. In the risk system of credit institutions, credit risks play a leading role. There are several classifications of credit risks. The diagram shows, in the author’s opinion, the most complete.

Reali

Standing

Conditions

Conditions

Term

Target

Size

Financially

Monetary

Coefficient

Last

Personal

Professional

Effective

ductility

bridge

storage

repay

loan

loan

loan

high odds

flow

Ents are enough

experience (crea

quality

nalism ru

organizational capacity

provide

provide

provide

nia cre

patients

accuracy

ditnaya

manuals

leadership

nization

values

values

values

Dita

capital

story)

structure

6.3.3. Credit risk management

Risk management is a set of measures aimed at reducing the likelihood of a credit risk occurring.

Main objectives of credit risk management:

Forecasting the likelihood of risk occurrence;

Assessment of the scale of possible losses;

Determining ways to reduce risk and sources of compensation for losses.

The main problem of the management decision “risk - result”:

Achieving maximum results at a given level of risk;

Minimizing risk for a given result indicator (for example, the level of profitability).

Credit risk management conventionally includes the following stages:

Risk recognition (determining current risk);

Quantitative risk assessment;

Carrying out measures to reduce risk (risk regulation);

Risk monitoring.

The objectives of credit risk management and the mechanism for their implementation at the level of individual loans are presented in the table.

Tasks	Contents of ensuring loan repayment and receiving interest for its use
	loan agreement taking into account the market conditions ■ probability of repayment of the loan by the borrower ■ taking into account the influence of the external environment
Definition the most effective way to minimize risk	■ insurance against the risk of loan repayment with payment of interest for using the loan ■ provision of a loan under a general guarantee from a reputable bank ■ provision of a loan under guarantee ■ provision of a loan as an investment program with participation in the number of founders or shareholders of the borrower enterprise ■ providing a loan secured by property and property rights ■ use of a mortgage agreement ■ use of a standby letter of credit ■ use of a letter of credit with installments ■ use of a promissory note secured by aval ■ application of a penalty (fine, penalty) ■ formation of a reserve
Making decisions	Adequate collateral, conclusion of a credit agreement

Credit risk management and assessment includes two levels:

■ risks of an individual loan;

■ risks of the bank's loan portfolio.

6.3.5. Credit risk management methods

Credit risk management methods

Probabilistic Indirect Analytical Statistical Scoring Expert combined

Assessment of the borrower's creditworthiness

Credit monitoring

Diversification of the loan and risk portfolio

Setting lending limits

Control over the quality of the loan portfolio

Problem Loan Management

Formation of a reserve for possible loan losses

Compliance with credit risk standards

Securing loans

Insurance (transfer of risk to the insurance company); in domestic practice, collateral and the risk of civil liability are insured.

K R N - = 800% - max size of large loans

N - = 50% - max amount of total loans to shareholders

max size of total loans

insiders

Regulation of the Central Bank of the Russian Federation dated March 26, 2004 No. 254-p came into force on August 1, 2004 and regulates the procedure and volumes of formation of reserves by the Commercial Bank (hereinafter referred to as CB) for possible losses on loans and equivalent debt. In this case, it is necessary to especially pay attention to the fact that the above provision regulates the formation procedure exclusively for the assets of the commercial bank (loans and equivalent debt - regulated by Chapter 5 of this regulation), reflected on the balance sheet of the commercial bank.

All commercial banks are required to form reserves in accordance with the rules of Central Bank Regulation No. 254P

Basic principles of loan classification:

1. compliance of the actual actions of the CB with the regulatory documents of the Central Bank, as well as internal documents and methods of the Central Bank, at the same time.

2. comprehensive and objective analysis of all information, while KB has the right to use any information obtained legally.

3. timeliness of loan classification and reserve formation, as well as the reliability and timeliness of reflecting changes in the amount of the reserve.

This provision refers to the value of the loan as the balance sheet valuation (balance of debt).

Reserves are created by the CB in the event of depreciation of loan debt or loss of part of its value due to non-fulfillment or improper fulfillment by the Borrower of its loan obligations to the CB, or if there is a likelihood of these events occurring (non-fulfillment or improper fulfillment of the requirements of the loan agreement).

Impairment of loan value refers to the difference between the book value (loan value), i.e. the balance of the loan and its fair value.

Reserves are formed for specific loans or for a portfolio of homogeneous loans. Homogeneous loans should be understood as loans and other bank credit products that have the same parameters and the same credit risk characteristics (for example: loans provided to private entrepreneurs for a period of 6 months.)

Clause 1.7 of this regulation determines the amount of reserve depending on the assignment of the loan to one of 5 quality categories. At the same time, the assignment of a loan to a certain quality category is based on the provisions of this instruction and the professional judgment of the bank (with the exception of the ranking of loans grouped into a portfolio of homogeneous loans and credit products).

Name	Degree
categories	credit risk
Standard	Absence
loans	credit risk
non-standard	Moderate
loans	credit risk
Doubtful	Significant
loans	credit risk
Problematic	High
loans	credit risk
Hopeless	Absence
PPL V")	probabilities
with su and y	loan repayment

Central Bank requirements for assessing credit risks.

1. Credit risk assessment must be carried out at least once a month on the reporting date.

2. The loan assessment and determination of the amount of the reserve is carried out on the basis of the professional judgment of the CB regarding the loan or other loan product.

Assessment of credit risk for issued loans.

In accordance with Chapter 3 of Regulation No. 254-P, credit risk assessment for each loan issued must be carried out on an ongoing basis. Based on an analysis of the borrower’s financial condition, as well as an analysis of the quality of debt servicing and all information available to the bank about any risks of the borrower (for example, information about the state of the borrower’s external debt), the bank makes a reasoned judgment. The source of information may be official financial statements, legal documents, tax statistics and other information about the Borrower. The list of information sources used is determined by the Bank independently, and the information received is included in the Borrower’s credit file.

Frequency of assessment:

1. for loans to individuals. persons - at least once a quarter on the reporting date

2. for legal loans. to persons (except for credit institutions) - at least once a quarter as of the reporting date

3. for loans to credit organizations - at least once a month.

The assessment of the degree of credit risk is determined based on an analysis of the borrower’s financial position, which is assessed in accordance with the internal methods of the commercial bank. In this case, these methods must be provided to the Central Bank of the Russian Federation upon request.

The Central Bank has determined the following degrees of assessment of the Borrower’s financial condition:

Rating Condition

Good Based on the results of the analysis, the borrower’s activities are recognized as stable, net assets are positive, there are no negative trends that could affect financial stability, etc.

The absence of direct threats to the current financial situation if there are negative trends in the Borrower’s activities that could lead to financial difficulties within one year if the borrower does not take appropriate measures.

Bad The Borrower is declared bankrupt or persistently insolvent, as well as if, as a result of a comprehensive analysis, threatening negative phenomena (trends) are identified, the consequence of which may be the Borrower’s insolvency.

The financial situation cannot be considered good in cases where at least one of the following is identified:

1. availability of file cabinets No. 1 and No. 2

2. the presence of hidden losses (for example, illiquid inventories, and (or) claims that are hopeless for collection) in an amount equal to or exceeding 25% of its net assets (equity (capital).

3. failure by the Borrower to fulfill other loan obligations to the creditor bank during the last year, or termination of obligations subject to the provision of compensation, which was not realized within 180 calendar days or more.

4. unprofitable activities not provided for by the business plan (agreed with the Bank), which led to a significant (more than 25%) decrease in its net assets compared to the maximum achieved.

Depending on the quality of debt servicing, loans fall into one of 3 categories: Category

Loan and interest payments are made on time and in full, there are isolated cases of delay in payment of interest and (or) principal debt during the last 180 calendar days (for loans to legal entities up to 5 calendar days) Average Delay in payment of interest and (or) principal debt ) principal debt during the last 180 calendar days (for loans to legal entities from 6 to 30 calendar days); At the expense of other loans from the Credit Institution, if the loan was provided to repay the debt of the Borrower, whose financial position during the completed and current financial year is assessed as good; At the expense of other loans of the Credit Institution, if the loan was provided to repay the Borrower’s debt, provided there are no delays on the principal debt, as well as if the servicing of the previously provided loan was assessed as good and the financial position of the Borrower cannot be considered good. Unsatisfactory The presence of arrears in the payment of interest and (or) principal debt within the last 180 calendar days (for loans to legal entities over 30 calendar days

days); The loan has been restructured and there are arrears on the principal and (or) interest, and the financial situation is assessed as bad;

Doubtful Problem loans loans

If there is no information on the borrower for one or more quarters necessary for monitoring, the loan is classified no higher than quality category II with the formation of a reserve of at least 20%

Formation of a reserve taking into account the quality of collateral.

This instruction suggests dividing the software into 2 quality categories:

1. Quoted securities of countries with a credit rating not lower than investment grade, in accordance with the classification of S&P, Fitch IBCA, Moody's, as well as securities of the central banks of these countries.

2. bonds of the Central Bank of the Russian Federation, securities and bills of the Ministry of Finance of the Russian Federation

3. Quoted securities of a company with a credit rating not lower than investment grade, in accordance with the classification of S&P, Fitch IBCA, Moody's.

4. CB’s own debt securities with a presentation period exceeding the loan repayment period.

5. security deposit

6. guarantees of a company with a credit rating not lower than investment grade, in accordance with the classification of S&P, Fitch

1. pledge of real estate, land and equipment in the presence of a stable sales market that allows the sale of the pledged item within 180 days, as well as provided there are no legal barriers to the sale of the pledged item and mandatory insurance in favor of the CB

2. pledge of raw materials, materials and other valuables in the presence of a stable sales market that allows the sale of the pledged item within 180 days, as well as provided there are no legal barriers to the sale of the pledged item and mandatory insurance in favor of the CB and

The security amount means:

For collateral - fair value determined by CB on an ongoing basis. For example, this could be a balance sheet valuation of inventories or the market value of real estate determined on the basis of an appraiser's opinion.

For securities - the market value for own debt instruments and the guarantee deposit - the amount of obligations provided for by the security or deposit.

For guarantee, aval and (or) acceptance of bills - the amount of obligations under the guarantee, aval and (or) acceptance. Security cannot be accepted if:

1. At the time the CB has the right to sell the subject of pledge, there is no legal documentation for it and there is no legal opportunity to sell the subject of pledge.

2. there are grounds for judging the impossibility of selling the collateral without a significant reduction in the value of the collateral

3. the subject of pledge is burdened with obligations to third parties, etc.

If there is collateral of 1st or 2nd quality category, the amount of the reserve is determined by the following formula:

P = PP x(1 -((ki X Obi) /CP)) P - minimum reserve size PP - a size of the estimated reserve

Baiseitov M.R.,

doctoral student of the program PhD,

KazEU named after T. Ryskulov

WAYS TO MINIMIZE CREDIT RISKS

One of the most serious problems facing commercial banks is the risk of loan defaults. Banks naturally seek to minimize this risk through various means of ensuring the repayment of bank loans.

Risk expresses the probability of the occurrence of any adverse event or its consequences, leading to direct losses or indirect damage. Financial markets are a very complex, unstable, high-tech environment. That is why banking is directly related to a wide variety of financial risks. The practice and methodology of control and management of banking risks is the most critical for banking activities. Successful risk management is the most important condition for the competitiveness and reliability of any financial organization. As numerous examples show, the most significant types of risk (credit, investment, currency) can lead not only to a serious deterioration in the financial condition of a credit institution, but also, in extreme cases, to loss of capital and bankruptcy. Proper assessment and management can significantly minimize losses.

The main task of risk management is to identify and prevent possible adverse events, find ways to minimize their consequences, and create management methodologies.

The degree of banking risks is determined both by economic conditions and by the strategy and level of bank management. Risk management requires quite complex procedures and control infrastructure.

Traditionally, the overall level of risk in a bank is assessed by the capital adequacy criterion, which plays the role of insurance to cover the risk.

The classification of risks is quite broad. Financial transactions involve varying degrees of risk. It is customary to distinguish the following types of risks: systemic, country, credit, investment, currency, interest, liquidity, concentration, operational, legal, market, reputation risk, abuse, technological and others.

Risk is identified by type of borrower (corporate client, bank, individual, etc.); risks associated with specific types of financial instruments (loan, bill, debt, forward, etc.) and banking operations (credit, investment, foreign exchange). In addition, there are internal risks - those associated with the internal environment of the bank, external ones, incl. systemic risks, accordingly, are the external conditions of the bank’s activities. Total banking risk shows the full extent of the bank's risk.

One of the main strategic objectives of the bank is to ensure an optimal balance between profitability and risk. A strategy associated with high-risk operations leads to losses and reduced liquidity. On the contrary, if profitability is below market levels, the bank begins to experience difficulties. In order to stabilize the level of risk when assets grow, it is necessary to increase capital.

It is known that risk is associated with the investment period - the longer the period, the greater the risk. Collateral is the types and forms of the borrower's guaranteed obligations to the lender (bank) to repay the loan if the borrower does not repay it.

Credit risk arises not only when lending for a period of time, for example to legal entities or individuals, or purchasing any debt obligations (government securities, corporate bonds, bills), but also during current payments. In accordance with this, they distinguish direct credit risk, the risk of default on securities (non-repayment of a debt obligation, non-payment of coupons, etc.), the risk of non-fulfillment of off-balance sheet obligations, on derivative financial instruments, and settlement risk.

The main elements of credit risk management are: analysis of the financial condition of borrowers and counterparties, loan collateral, setting limits on transactions, and reserving.

The traditional way to minimize this risk when lending to legal entities or individuals is to accept collateral (loan security) in the form of liquid assets or valuable property. One of the ways to minimize credit risk in settlement transactions is to make an advance payment.

The fundamental difference between the modern lending procedure is that the bank is, first of all, interested in the lending entity with whom the loan agreement is concluded after studying its ability to repay the loan. All issues related to lending are resolved by the bank and the borrower on a contractual basis.

The loan agreement defines the mutual obligations and responsibilities of the parties. It stipulates: the purposes and objects of lending, the size of the loan, terms and other conditions for the issuance and repayment of loans; types of loan collateral; interest rate for the loan; a list of documents submitted by the borrower to monitor the movement of the loan and the financial situation of the client; frequency of presentation to the bank, as well as the bank’s control functions in the lending process.

The timeliness of loan repayment will depend on how clearly and competently the Loan Agreement is drawn up.

During the execution of the loan agreement, unforeseen problems may arise, as a result of which it is necessary to change the terms of the agreement. Changes in lending conditions and re-issuance of loans can occur at the initiative of both the borrower and the bank. A change in the terms of the contract for reissued loans means one of the following changes:

Reduction in the additional agreement of the interest rate, provided that the original agreement provides for a fixed rate; with a floating interest rate - changes that do not comply with the conditions contained in the original agreement of the parties;

Extension in an additional agreement of the loan period specified in the original loan agreement;

An increase in the amount of the loan provided compared to the original;

Re-issuance of an additional agreement, in connection with which the quality of collateral for loan debt actually improves compared to the original conditions. Re-issuance of a loan indicates, first of all, a decrease in its quality and an increase in banking risk.

One of the terms of the loan agreement should be the right of the bank to terminate the loan agreement ahead of schedule in the event of a violation by the borrower client of the obligations stipulated by the agreement.

Typically, the bank requires early repayment of the loan or collects it indisputably when:

Late submission of balance sheets and other forms of reporting to the bank or complete refusal to submit them;

Identification of cases of sale of pledged property without the consent of the bank;

Identification of cases of unsatisfactory storage of pledged property;

Late payment of principal and interest. The contract may provide the client-borrower with the right, for justified reasons, not to use the loan (credit line) in whole or in part. The initially agreed upon amount of the loan (credit line) may also be subsequently adjusted by the parties. If the loan is repaid early or is not fully used by the borrower, the bank loses part of its interest income.

Banks must continually pursue a policy of dispersing risk and avoid concentration of loans among a few large borrowers, as this could have serious consequences if one of them defaults on the loan. The bank should not risk depositors' funds by financing speculative (albeit highly profitable) projects.

It should be noted that the quantitative assessment of assets does not play a special role in the analysis of the bank’s activities; in accordance with international practice, the main criterion is the assessment of the quality of assets.

As is known, domestic banks are accustomed to providing mainly short-term lending, and are reluctant to expand long-term lending due to the high degree of risk due to the presence of industry specific features and a long payback period for investments. The issuance of a long-term loan does not allow one to reliably judge whether a given borrower will be able to fully fulfill his obligations to the bank in a few years, while a short-term loan is issued for a relatively short period of time, during which the financial stability of the enterprise does not change significantly.

Credit risk in relation to a bank arises when the banks' counterparties fail to fulfill their obligations, which, as a rule, manifests itself in the failure to repay (in whole or in part) the principal amount of the debt and interest on it within the terms established in the loan agreement.

In order to limit risk and increase the influx of credit resources into industry, it is necessary to improve the management of loan portfolios of domestic commercial banks, characterized by the following features:

Propensity for short-term lending;

Insufficient quality of banks' resource base;

Lack of a powerful information center;

Lack of highly specialized personnel.

In this regard, the main objectives of credit management aimed at reducing credit risk are:

Determination of factors influencing the level of credit risk;

Optimization of the loan portfolio in terms of credit risks, client composition and loan structure;

Determining the level of creditworthiness of the borrower and identifying the possibility of changing his financial situation;

Identification of problem loans at an early stage of their occurrence;

Assessing the sufficiency of the resource base and its timely adjustment;

Ensuring diversification of credit investments, their liquidity and profitability;

Development of the bank's credit policy taking into account the analysis of the quality of the loan portfolio.

The high degree of risk in lending to industrial enterprises requires a commercial bank to have a carefully thought-out risk management policy within the framework of its credit policy, which includes strategy, assessment methods, and forms of risk management.

Credit management in the field of credit risk management involves diversifying risk, defining a system of delegation of authority, creating a high-quality credit dossier, a monitoring system for the issued loan, the availability and quality of an information database, as well as the presence of a service that carries out the return of problem loans.

Risk diversification implies that the loan portfolio of any bank must be diversified so that the insolvency of one client, group of clients, or industry does not jeopardize the existence of the bank.

Banking management in the field of credit management is a complex and multidimensional process. The quality of management of the lending process depends, first of all, on the success of the implementation of each stage separately, which in turn is directly related to the experience and qualifications of personnel.

Modern conditions of economic development are still characterized by a shortage of not only qualified bank employees, but also competent management personnel at industrial enterprises, which has led to instability and uncertainty in the activities of commercial banks in relation to the industrial sector.

The process of active interaction between banks and industry is hampered by misunderstanding and reluctance on both sides to find a compromise way out of the current situation. In fact, the mutual integration of banks and industry presupposes the presence of strong, inextricable and long-term ties between these structures and their divisions. Therefore, the management and management personnel of banks and industrial enterprises must be clearly aware that the use of credit should not be momentary and one-time, on the contrary, credit relationships should be based on long-term and close relationships with the direct participation and control of each party.

Thus, in the process of interaction between commercial banks and industrial enterprises in modern conditions, the active use of foreign experience, adapted to domestic conditions, would contribute to a quick way out of the current paradoxical situation when industrial enterprises experience a shortage of financial resources, and banks can, but are afraid to actively lend to the latter . At the same time, the use of optimal approaches from foreign experience to minimize credit risks is not always acceptable for the Kazakh economy due to the distinctive features of the market infrastructure.

References:

1. Seytkasimov G.S. Banking, A: " Karzhy - Karazhat", 1998

Credit risk management is the purposeful, systematic activity of a credit organization in relation to the possibility of its occurrence. Risk management always characterizes the quality of management, understanding and ability of the bank to resist the ineffective functioning of the loan. It is believed that when lending, as, in fact, when performing other operations, the bank balances between profitability and liquidity, but in practice the management of activities is more multifaceted. In the process of activity, the bank “chooses” not only between profit and liquidity, but also its reliability and competitive position in the market. Management is always not so much a dilemma as a multifaceted task that the bank has to solve in the process of performing certain operations.

Credit risk management is not a disparate set of individual activities, but a certain system elements of which include:

• § identification of risk factors (causes) that can cause negative consequences in the lending process;
• § credit risk assessment;
• § development of measures and tools to minimize credit risks;
• § organizing control over risk management.

Activities to manage credit risks should be differentiated. In this regard, on the one hand, there is a risk management policy associated with its cause, and on the other hand, a risk management policy associated with its effect. The first group of measures, related to the presence of causes of risk, is aimed at reducing the likelihood of risk, reducing the degree of uncertainty, and reducing damage in advance. Risk-related measures, on the contrary, are aimed at reducing possible losses and mitigating the negative impact of the resulting damage on the bank’s operation. This damage should be minimized to the extent possible to ensure the continued existence of the credit institution without disruption.

There are several proven ways to minimize the credit risks of a commercial bank.

1. Diversification of the loan portfolio. The essence of the diversification policy is to provide loans to a large number of clients independent from each other. In addition, loans and securities are distributed according to terms (regulation of the share of short-, medium- and long-term investments depending on the expected changes in the market situation), as well as by purpose of loans (seasonal, for construction, etc.), by type of collateral for different types of assets, by the method of setting the loan rate (fixed or variable), by industry, etc.

In order to diversify, banks carry out credit rationing - they set floating lending limits or credit ceilings for borrowers, beyond which loans are not provided, regardless of the level of the interest rate.

2. Conducting a comprehensive analysis of potential borrowers and ranking them by degree of reliability. In the process of such analysis, it is especially important to analyze the financial condition of a potential borrower on the balance sheet and profit and loss statement, since in the context of a constant increase in demand for credit resources compared to their supply, increasing the efficiency of the procedure for selecting several borrowers becomes a priority task of the credit policy of any bank . There are no more or less formalized methods for such analysis. Therefore, taking into account the experience of American banks, this gap can be partially filled by proposing a basic scheme for such an analysis. It assumes that the bank optimizes the distribution of loan resources and selects the most reliable from many potential borrowers, i.e. he ranks them, assigning each a loan priority rating (hereinafter referred to as the borrower rating).

When forming a loan portfolio, one should adhere to a certain level of concentration of lending operations, since the Bank operates in a specific market segment and specializes in servicing a certain clientele. At the same time, excessive concentration significantly increases the level of credit risk. At the same time, the Bank should not concentrate its activities in little-studied, new, unconventional areas. The Bank has developed certain methods for minimizing credit risks, which can be divided into six groups, highlighting methods aimed at:

• 1) risk prevention;
• 2) risk transfer;
• 3) risk absorption;
• 4) risk compensation;
• 5) risk distribution;
• 6) diversification.

Risk prevention. Much here is determined by the bank’s ability to refuse high-yield lending if there are doubts about the repayment of the loan.

Risk Transfer Methods involve the creation of a situation in which a third party assumes the risk.

Ways to absorb risk are aimed at neutralizing possible damage if a probable event occurs or other methods of minimizing it fail. The primary method of such risk absorption is the formation of a reserve for possible losses on loans.

Risk compensation methods are aimed at equalizing the consequences of risk through the mechanism of maintaining a break-even state.

Methods for dividing the total set of risks applied to individual parts with purpose limiting the impact of damage to that individual part rather than the entirety.

Diversification of the Bank's loan portfolio is carried out by distributing loans to various categories of borrowers, terms of provision, types of collateral, and by industry.

Credit risk management is one of the most important aspects of banking practice. Balanced management of credit risk and loan portfolio allows you to optimize the structure of the loan portfolio, ensuring the maximum level of profitability with a minimum level of risk.

Thus, at present, the practice of borrowers not repaying loans to commercial banks is still quite common, which is facilitated by a gap in banking legislation. To this day, the issue of mutual responsibility of subjects of credit and financial relations in terms of compliance with the principles and conditions for granting loans has not been worked out. In fact, there is no legal mechanism for identifying obviously fictitious loans. In addition, if the knowledge of the lender and the borrower about the subsequent non-repayment of the loan is proven, no punishment is provided for any of the parties to the transaction.

economics, entrepreneurship and law

publishing house

Creative economy

Journal of Economics, Entrepreneurship and Law

minimizing the credit risks of commercial banks as a component of their economic security

Idrisova E.A.1

This article examines the economic and legal aspects of lending to legal entities. To solve modern lending problems, a systematic and comprehensive approach is proposed. In addition to improving the bank’s existing credit policy in the field of lending to legal entities, it is proposed to introduce additional conditions that promote mutually beneficial cooperation between borrowers and commercial banks, thanks to which it is possible to maintain the economic security of the credit organization.

KEY WORDS: collateral, lending to legal entities, minimizing credit risks, interest rate, regulatory framework, economic security

Minimizing the credit risks of commercial banks as a component of their economic security

1 The Ural State University of Economics (USUE), Russia

introduction

For credit institutions, lending to legal entities is a priority, because These clients are more stable and solvent, which positions them as the most profitable segment for cooperation. Currently, the structure of lending to legal entities contains problems associated with recent macroeconomic events that have resulted in the emergence of negative economic conditions in the Russian Federation. This fact negatively affected the activities of commercial banks when conducting loan operations. A large number of companies, whose revenue is more than 300 million per year, have suffered large losses in their activities. In this regard, after a short time they had no

Ural State Economic University, Ekaterinburg, Russia

ANNOTATION:

opportunities to repay your creditor obligations to banks and counterparties. This led to a decrease in the rating of these companies in the credit history bureaus. Now commercial banks carry out strict procedures in order to minimize credit risks.

The relevance of the work is explained by the fact that credit risk management determines the economic stability of the banking system, which is especially necessary in an unstable economy.

The purpose of the study is to determine ways to improve the lending activities of commercial banks regarding lending to legal entities, helping to minimize credit risks in the conditions of cooperation with this market segment.

All existing measures aimed at minimizing credit risk are based on a well-developed lending system for both individuals and legal entities. The work of banks is carried out according to the usual scheme: a questionnaire, a package of documents, and in their absence - entry into the database. Then there is a security check, a credit assessment, after which a decision is made to grant or refuse a loan. Lending requires greater responsibility, and therefore the number of indicators for verification increases, and the requirements become more stringent. As a result, checking the creditworthiness of legal entities takes longer. However, each of the stages of lending to legal entities can be improved (Beloglazova, Who11ue1$kaua, 2011).

The article studies economic and legal aspects of crediting of legal entities. To solve modern crediting issues, we suggest a systematic and integrated approach. In addition to improving the current bank's credit policy in the sphere of crediting of legal entities, we propose to introduce additional terms conducive to mutually beneficial cooperation between borrowers and commercial banks, thanks to which it is possible to maintain the economic security of a credit institution.

KEYWORDS: pledge, crediting of legal entities, minimization of credit risks, interest rate, regulatory framework, economic security

Received: 11/21/2016 / Published: 12/30/2016

© Author(s) / Publication: CREATIVE ECONOMY Publishers For correspondence: Idrisova E.A. (idrisova_elmiraOO0mail.ru)

Idrisova E.A. (2016) Minimizatsiya kreditnyh riskov kommercheskikh bankov kak sostavlyayuschaya ikh economicheskoy bezopasnosti. Ekonomika, predprinimatelstvo i pravo. 6. (4). - P. 437-443. doi: 10.18334/epp.6.4.36585

The creditworthiness of a commercial bank client is the borrower’s ability to pay off his debt obligations (principal and interest) in full and on time (Lautshyn, Walen1$eva, 2013).

Today, the borrower has a need to provide more and more time to repay his loan obligations during the crisis (this period ranges from approximately four to ten years). Therefore, banks give preference to attracting clients who can fully secure the loan with property (collateral). The subject of the pledge can be any property, including things and property rights (claims), with the exception of property withdrawn from circulation, as well as rights, the assignment of which to another person is prohibited by law (Beloua, 2009). According to bank regulations, this property can be:

Real estate (garages, parking spaces, apartments, dachas, houses, land),

Motor transport units,

Various special machinery and equipment,

Some banks include specific collateral (property rights),

Gooods at the work.

When calculating the minimum collateral amount, two quantitative indicators are taken into account: the amount of the principal debt and the total interest payable for the loan, expressed in rubles. In order to reduce loan risks, credit institutions use collateral ratios in analytics. These coefficients have different meanings for each category of collateral. If real estate is accepted as collateral, then this coefficient is 0.9; for motor transport varies according to the type of car: if the service life is up to three years, then 0.7, from four to nine - 0.6, from nine - 0.5, if the period is more than twenty years, then such transport is not accepted as security. The bank's collateral assessment department evaluates the remaining collateral with a low coefficient of up to 0. Until 2013, the borrower client had the right to independently choose the type of currency in which a commercial bank lent money to him. However, now banks do not risk issuing loans and placing deposits in foreign currency. At the present stage of development of the banking system, a difficulty has arisen with the fact that borrowers who purchased loans in foreign currency cannot meet their obligations. At the time the loan was issued, the dollar exchange rate against the ruble was significantly lower than now, but with a decrease

Idrisova Elmira Albertovna, master’s student (idrisova_elmiraOO0mail.ru)

QUOTE ARTICLE:_

Idrisova E.A. Minimizing credit risks of commercial banks as a component of their economic security // Economics, entrepreneurship and law. - 2016. - Volume 6. - No. 4. - P. 437-443. doi: 10.18334/err.6.4.36585

exchange rate of the ruble, previously received loans increased in value. Under these conditions, the organizations being financed were unable to repay their obligations, and many went bankrupt (Pozdyshev, 2015).

One of the most pressing problems of lending to legal entities is also the relatively large amount of commission payments. The commission for crediting loan funds to the organization's current account in some banks must be paid when signing a loan agreement, in other banks it is included in the amount of the principal debt and amounts to an average of 1-2% of the loan amount.

In banking, insurance (at the expense of the client) of collateral, guarantors and other types is no exception. Basically, insurance occurs with the same bank clients - insurance companies that place deposits. In all banks, the loan rate is calculated taking into account: risk premiums (they are identified from an analysis of annual and quarterly revenue), the business load of the client, the value of the market analysis of the collateral, the form of collateral, etc. In banks, interest rates have different values ​​with a wide range . Banks that have specifications for analyzing certain business segments (80%) set high interest rates (JSC Rosselkhozbank), other banks - at the optimal level (Sberbank of Russia, VTB Bank, Primorsky Social Bank "Primsotsbank").

Those banks that develop relatively low loan rates set higher requirements for the client. This is reflected in the list of documents provided, as well as in the high security requirements. These credit institutions impose increased criteria on the financial and economic condition of the client (including the persons who will act as guarantors in the transaction) and its analysis. Therefore, it becomes difficult to obtain funds. Credit banks request the entire database of client contracts for the analyzed period, studying the carry-over balance for payment for the products that were shipped. If the borrower is engaged in the provision of services, then the indicator of the services provided is analyzed. The analysis includes studying the number of buyers on an ongoing basis to the total volume of the client’s base under contracts, the number of framework agreements to the total client’s base under contracts, the quantitative indicator in rubles of transactions under contracts that are being signed.

When solving lending problems, it is necessary to apply a systematic and comprehensive approach. Currently, the legislative framework regulating the relationship between commercial banks and legal entities in the process of lending to the former is poorly developed. Therefore, the main directions for improving the lending system for corporate clients should be:

Development and publication of regulations to determine the financial condition of the borrower;

Determining a list of documents to accurately confirm management reporting (original invoices: to provide information on costs

there; contracts for the supply and purchase of products, etc.), as well as summing up the obtained quantitative information with consolidated reporting on the organization’s income and expenses from all current accounts (by requesting an extract of 51 accounts);

Creation and implementation of matrices (assessment of the components of expected losses by statistical analysis of the probabilities of transferring loans between overdue groups), determining: on the one hand, the degree of probability of client behavior and, on the other hand, the possible actions of the bank if a particular situation arises. In this case, the main (standard, basic) scenarios for the possible development of the situation after the borrower receives a loan must be developed;

Minimizing the use of express analysis of the position of a potential borrower.

In addition, the law should establish requirements for an interest rate close to the established unit. Thus, a corridor of 24-26% per annum can be established, which should include lending rates. Banks provide loans to the borrower at 15-25% per annum, and the lending organization has the opportunity to reduce or increase the interest rate by fulfilling the following conditions: when opening a bank account, the rate is reduced by one and a half percent, or for transferring the turnover of funds to the bank, opening a salary project and other. In this regard, additional conditions may be established. Such conditions may include:

Providing property security and guarantors - rate reduction by 0.5%;

Repayment of the previous credit line provided - by 0.1%.

Using the above methods, banks are able to effectively structure a transaction and rank clients by risk. Thus, the credit institution minimizes losses by reducing the amount of overdue debt.

conclusion

The conducted study of minimizing the credit risks of commercial banks as a component of economic security within the framework of the presented article allows us to draw the following conclusions.

It has been determined that in the conditions of the modern system of bank lending to legal entities, associated credit risks arise that negatively reflect

Relying on the economic security of credit institutions. In order to minimize credit risks, commercial banks must develop and implement a more advanced credit policy, be able to qualitatively determine the financial condition and creditworthiness of a potential borrower, apply reasonable bank interest rates, and give preference to lending to legal entities capable of providing property or property rights as collateral.

The article establishes that when solving lending problems, it is necessary to apply a systematic and comprehensive approach. As measures to increase the economic security of banks when lending to legal entities, the author made the following proposal: it is necessary to legally establish requirements for an interest rate close to the established unit. Thus, a corridor of 24-26% per annum can be established, which should include lending rates.

Thus, to minimize the credit risks of commercial banks, the following measures were proposed within the article: the development and implementation by commercial banks of a more advanced credit policy, improving the quality of determining the financial condition and creditworthiness of a potential borrower, the use of reasonable bank interest rates, giving preference to lending to legal entities capable of provide property or property rights as collateral.

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