Minimizing bank credit risks. Ways to minimize credit risk in modern conditions

  • Voznaya Olga Alexandrovna, bachelor, student
  • Bashkir State Agrarian University
  • CREDIT RISKS
  • CREDITOR
  • LENDING
  • BANKING RESOURCES

A bank's lending activity is one of the fundamental criteria that distinguishes it from non-banking institutions. Lending operations are the most profitable item in the banking business. The bulk of net profit is generated from this source. At the same time, non-repayment of loans, especially large ones, can lead the bank to bankruptcy. Therefore, credit risks are the main problem of a bank, and its management is a necessary part of the development strategy and tactics of any commercial bank.

  • Consumer lending as the most popular banking operation
  • Issues of lending to agricultural producers in the Russian Federation
  • The role of microfinance organizations in economic development

Credit operations are the most profitable item in the banking business. At the same time, the structure and quality of the loan portfolio are associated with the main risks to which the bank is exposed in the process of operating activities (liquidity risk, credit risk, interest rate risk, etc.). Among them, the central place is occupied by credit risk (or the risk of the borrower’s failure to repay the principal debt and interest on the loan in accordance with the terms and conditions of the loan agreement). The profitability of a commercial bank is directly dependent on this type of risk, since the value of the credit portion of the bank's asset portfolio is largely influenced by non-repayment or incomplete repayment of issued loans, which in turn affects the bank's equity capital.

Bank managers need to be aware that it is impossible to completely eliminate credit risk. Moreover, interest on loans issued is essentially a payment for the risk that a commercial bank assumes when issuing a loan. The greater the credit risk, the higher, as a rule, the interest rate paid on the loan.

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

  1. Loan portfolio diversification - the essence of the diversification policy is to provide loans to a larger 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), by purpose of loans (seasonal, for construction, etc.), by type of collateral for various types of assets, by the method of setting the loan rate (fixed or variable), by industry, etc.
  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 the potential borrower on the balance sheet and profit and loss account. Since, in the context of a constant increase in demand for credit resources over their supply, increasing the efficiency of the procedure for selecting several borrowers from their general queue becomes a priority task of the credit policy of any bank.

It is recommended that the lender study the financial reporting forms of the enterprise in four areas:

  • analysis of solvency (the degree of provision of reserves and costs with sources of their formation);
  • analysis of the enterprise’s creditworthiness (its susceptibility to loans, ability to fully pay off its obligations on time with liquid funds);
  • analysis of financial independence (the ability to independently and effectively implement financial policies);
  • analysis of the debt structure (determining the type of policy of enterprise managers based on the structure of loans received).

Financial analysis requires the availability of reliable, constantly updated financial information, whether obtained directly from the client (audited financial statements), available in the credit archive (information about delays in debt repayments and other violations) or coming from external sources (from banks with which dealt with the borrower, his business partners, from the current press, etc.).

In practice, the most important types of credit collateral include surety, guarantee, pledge of goods, securities, movable and immovable property, insurance policy, assignment of the borrower's claims and accounts to the bank (assignment).

Through a guarantee agreement, the guarantor undertakes an obligation to the creditor (bank) to pay, if necessary, the debt recognized by the borrower (it is in this form that the guarantee is most often found in credit transactions).

A guarantee is a written obligation of the guarantor to pay a certain amount for the guaranteed person upon the occurrence of a guarantee event. Bank guarantees have become especially popular. It differs from a guarantee in that within the framework of the bank’s guarantee obligation, the borrower’s claims and objections to the lender are not taken into account.

Loan insurance involves transferring the risk of non-repayment to an insurance organization; it is issued by an insurance policy, which can be accepted as collateral for a loan. In this case, all insurance costs are borne by the borrower. If the bank fails to repay the loan, the bank has the right to expect compensation from the insurance company for the lost loan in accordance with the conditions specified in the insurance policy.

An assignment (assignment) is a document by the borrower (assignor), in which he assigns his claim (receivables) to the lender (bank) as security for the repayment of the loan.

With the development of high technologies both in the world and in Russia, cases of hacker attacks on credit organizations have become more frequent; recently, many credit organizations in our republic have been subjected to hacker attacks; as a rule, this process begins with infection of the Troyan virus, the bank client program, then , when passwords from the program are received, a payment order from the client is sent to the bank with a request to transfer money to the account specified in the document, after the operation the money is cashed out at ATMs in different cities of Russia. This is one of those risks for which it is impossible to be prepared; it is necessary to introduce a new rule, verbal confirmation by the client of any operation carried out on his current account, i.e. The operator responsible for the current accounts of legal entities should not have the right to carry out a payment without confirmation of payment. This creates indirect problems that directly affect credit risks.

Bibliography

  1. Zapolskikh Yu.A. Credit risk and the main ways to minimize it. Economy and society. 2014. No. 2-2 (11). pp. 126-128
  2. Money, credit, banks // Oleynikova I. N. Ed.: Master's degree 2008
  3. Larionova I. Banking risks // Money and credit. - 2001. - No. 12.
  4. www.bankir.ru – “Bankir.ru”

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 by maturity (regulation of the share of short-, medium- and long-term investments depending on the expected change 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 portion 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.

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 having 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 a 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.

Credit operations, as stated, are the most profitable item in the banking business. At the same time, the structure and quality of the loan portfolio are associated with the main risks to which the bank is exposed in the process of operating activities (liquidity risk, credit risk, interest rate risk, etc.). Among them, the central place is occupied by credit risk (or the risk of the borrower’s failure to repay the principal debt and interest on the loan in accordance with the terms and conditions of the loan agreement). The profitability of a commercial bank is directly dependent on this type of risk, since the value of the credit portion of the banking asset portfolio is largely influenced by non-repayment or incomplete repayment of issued loans, which is reflected in the bank’s equity capital. Credit risk is not a “pure” internal risk of the lender, since it is directly related to the risks assumed and borne by its counterparties. Therefore, managing this risk (minimizing) involves not only analyzing its “internal” component (associated, for example, with the degree of diversification of the loan portfolio), but also analyzing the entire set of risks of borrowers. Khandruev A.A. Bank risk management: scientific and practical aspect // Money and Credit. - 2004. - No. 6. - p. 17-21.

Bank managers need to be aware that it is impossible to completely eliminate credit risk. Moreover, interest on loans issued is essentially a payment for the risk that a commercial bank assumes when issuing a loan. The greater the credit risk, the higher, as a rule, the interest rate paid on the loan.

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 by maturity (regulating the share of short-, medium- and long-term investments depending on the expected change 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).

This rating consists of the exact value of the borrower's integral indicator and the grouped value of the borrower's integral class. As a result, each of the enterprises belongs to one of four classes. Edronova V.N., Khasyanova S.Yu. Foreign and domestic approaches to determining the borrower’s creditworthiness // Money and Credit. - 2002. - No. 10. - p. 3-8.

In the vast majority of cases, the lender issues loans in the form of money (a resource whose liquidity is equal to 1), and the enterprise then exchanges them for liquid and profitable economic resources. And since the structure of the company’s assets is inertial, the creditor should be primarily interested in the structure of the enterprise’s property, depending on the liquidity of its individual items.

It is recommended that the lender study the financial reporting forms of the enterprise in four areas:

  • · analysis of solvency (the degree of provision of reserves and costs with sources of their formation);
  • · analysis of the enterprise’s creditworthiness (its susceptibility to loans, ability to fully pay off its obligations on time with liquid funds);
  • · analysis of financial independence (the ability to independently and effectively implement financial policies);
  • · analysis of the debt structure (determining the type of policy of enterprise managers based on the structure of loans received).

Solvency indicators. In modern economic literature there are a large number of definitions of solvency. Most often, solvency at any point in time is defined as the payment surplus/deficiency between available liquid resources and obligations to be repaid at that moment. However, it makes sense to study the essential features of a company’s solvency and consider solvency as an external effect of the provision of inventories and costs with the sources of their formation, and insolvency, respectively, as their insecurity. For the purposes of the analysis carried out by the lender, it is sufficient to fix four levels of solvency depending on the values ​​of three main ratios:

  • 1) the ratio of the provision of inventories and costs with their own sources of formation (own working capital)
  • 2) the ratio of supply of inventories and costs with own and long-term borrowed sources
  • 3) the ratio of supply of inventories and costs by main sources

Creditworthiness indicators. This is the core block of the bank's analysis of the financial condition of an enterprise. Creditworthiness is the ability of an enterprise to “accept” a loan without being overloaded with borrowed funds and to pay it off in full and on time.

The essence of creditworthiness analysis is to calculate a system of norms that makes it possible to determine with which assets that have different periods of sale, and therefore, within what period of time, an enterprise can pay off its obligations already assumed, if the structure of its finances (which also indicates the effectiveness of its activities) is not will change.

The system includes three standards.

  • 1. The rate of cash resources shows what share of short-term debt the company can repay immediately;
  • 2. The liquidity rate characterizes the payment capabilities of an enterprise for short-term loans and accounts payable, subject to timely settlements with debtors;
  • 3. The coverage rate characterizes the enterprise’s ability to repay the most urgent obligations through the sale of not only quickly salable assets, but also material current assets. Kabushkin S.N. “Management of bank credit risks” - M.: New knowledge, 2004. - p. 88

Analysis of the financial independence of the enterprise. This block of analysis allows us to answer the question: does the enterprise have the opportunity to use a loan to improve the efficiency of its work, or is it not independent in making its decisions in the financial field?

To analyze financial independence, it seems appropriate to use a system of four financial ratios.

The autonomy coefficient characterizes the share of the enterprise's own funds in the total balance sheet and shows how dependent it is on external sources of financing. The higher the value of this indicator, the greater financial independence the enterprise has.

The agility coefficient shows what part of the enterprise's own working capital is in mobile form and, therefore, determines the degree of freedom of financial maneuver.

The DER (debt-eguity ratio) indicator complements the autonomy coefficient. Characterizes how many rubles of borrowed funds account for one ruble of own funds.

The "free hands" coefficient characterizes the ratio of mobile and immobilized funds in the balance sheet of an enterprise, i.e. in fact, its ability to quickly respond initially to changing external conditions. This coefficient is an adjustment indicator for calculating the DER rating. Edronova V.N., Khasyanova S.Yu. Foreign and domestic approaches to determining the borrower’s creditworthiness // Money and Credit. - 2002. - No. 10. - p. 3-8.

The integrated rating of the borrower summarizes information on the analysis of solvency, analysis of creditworthiness, analysis of financial independence and analysis of the structure of loans received. In this case, the “share” of each block in the overall assessment of the financial condition of the company automatically depends on the number of coefficients used to analyze each block. Thus, increasing the number of characteristic coefficients in the sectors most interesting to the investor makes it possible to simultaneously obtain more detailed information and reflect the importance of this sector in the overall rating assessment of the financial condition. Sagitdinov M.Sh., Kalimulina F.F. On the issue of analyzing the activities of a commercial bank // Banking. - 2003. - No. 10. - p. 15-24.

Thus, as a result of generalizing the results of the financial analysis of a Russian company on the part of a potential lender, we have a three-position set of integral indicators: an integral assessment of liquidity, an integral rating of the borrower and an integral class of the borrower. The substantive interpretation of assigning borrowers to a particular class is defined above. The database of loan borrowers is ranked according to the integral rating.

When comparing loan borrowers within the same class, it is necessary to consistently compare the following indicators:

  • 1) integral rating of the borrower (preference is given to the borrower whose rating value is lower);
  • 2) integral assessment of liquidity (preference is given to the borrower whose value of this indicator is greater).

However, comparison based on the integral rating is carried out with a maximum permissible deviation of ±0.0(9). If borrowers of the same class occupying consecutive cells in the database have a difference in integral ratings modulo within 0.0(9), then preference is given to the borrower whose integral liquidity assessment is greater (the comparison is made without any maximum deviations ).

This complicated procedure was introduced because the integral rating has one of its components an error that occurs due to the loss of information at different stages of its calculation (for example, when rounding or when moving from a specific value of a financial ratio to its class). The threshold deviation (and with a sufficiently large margin of safety) can be a value of 0.1. The choice of assessing balance sheet liquidity as the second (testing) integral indicator was due to two circumstances:

  • - firstly, the liquidity assessment in a different (non-standardized) form reflects the results of a creditworthiness analysis - the most important block of enterprise analysis carried out by the bank;
  • - secondly, the loss of information when calculating the integral assessment of liquidity is “microscopic”.

Thus, a system of three integral indicators (class/rating/liquidity assessment) allows you to accurately rank any subset of potential loan borrowers according to their reliability and thereby reduce the risk of non-repayment of loans. Comparative calculations have shown that this system is more effective than one- or two-position sets of similarly constructed integral indicators.

To conduct a complete financial analysis of borrowers, the bank must use, along with quantitative indicators, also qualitative ones, which are impossible to measure and evaluate in numbers. In the process of making a decision on issuing a loan, it is necessary to take into account the reputation of the borrower (staff qualifications, compliance with contracts, payment discipline, etc.), as well as the features and prospects of the economic situation (development of the industry in which the borrower operates, his role and place in the industry, level of competition, etc.), presence of demand for products produced and sold by the borrower, etc.

Financial analysis requires the availability of reliable, constantly updated financial information, both obtained directly from the client (audited financial statements), and available in the credit archive (information about delays in debt repayment and other violations), as well as information coming from external sources (from banks with which the borrower dealt, his business partners, from the current press, etc.);

  • 3) control over the use of credit. It should be distinguished from monitoring the current state of the borrower in the lending process. The procedure for such control should be laid down in the loan agreement or a special annex to it (for example, the requirement to transfer all accounts of a potential borrower to the bank, etc.). It is necessary to develop the bank's security service;
  • 4) attracting sufficient collateral for the loan issued to protect against losses in case of failure to fulfill obligations.

In this case, an important circumstance is the fact that the amount of loan security must cover not only the amount of the loan issued, but also the amount of interest on it. However, under no circumstances should a loan be granted on a questionable transaction because the client provides “good” collateral. Collateral is only an additional guarantee, not a payment for the loan; it does not reduce the risk of non-payment of the debt. This point should be especially taken into account by Russian banks, since most often the sale of collateral does not compensate for losses from the outstanding loan.

In practice, the most important types of credit collateral include surety, guarantee, pledge of goods, securities, movable and immovable property, insurance policy, assignment of the borrower's claims and accounts to the bank (assignment).

Through a guarantee agreement, the guarantor undertakes an obligation to the creditor (bank) to pay, if necessary, the debt recognized by the borrower (it is in this form that the guarantee is most often found in credit transactions). As practice shows, this is an acceptable form of security, provided that the guarantor has impeccable solvency, which does not raise doubts regarding the volume and legal validity of the obligations guaranteed by him.

A guarantee is a written obligation of a third party to pay a certain amount for the borrower upon the occurrence of a guarantee event. Bank guarantees have become especially popular. It differs from a guarantee in that within the framework of the bank’s guarantee obligation, the borrower’s claims against the lender are not taken into account. Therefore, when securing a loan, banks give preference to a guarantee rather than a surety, especially if the guarantee contains a clause “on first demand”. However, the use of guarantees as collateral for a loan requires the same analysis of the guarantor as of the borrower itself. Since a guarantee as a contingent liability is an off-balance sheet item of the guarantor, when assessing the credit risk associated with the guarantor, it is necessary to examine both the on-balance sheet and off-balance sheet transactions of the guarantor.

A bank using collateral withdrawals must determine which assets are considered suitable collateral for a given loan transaction and how to calculate the present value of the loan. When assessing the value of pledged assets, it is necessary, in particular, to take into account the following characteristics:

  • - the possibility of their sale on the market in the shortest possible time and without pre-sale preparation;
  • - frequency of fluctuations in market prices for a given type of asset;
  • - the ease with which the creditor can locate the collateral and take possession of it;
  • - depreciation and obsolescence of pledged assets.

It should be remembered that loans secured by physical collateral in the form of accounts receivable are most susceptible to fraud on the part of borrowers.

In the course of commercial activities, the borrower may have claims against a third party. In this case, he assigns them to the bank as collateral for the loan received. The normal assignment (assignment) of obligations as a guarantee of banking claims is widespread in the practice of financial institutions. Compared to collateral, the assignment of claims and accounts has technical advantages. In this case, there are no problems associated with storing collateral.

Loan insurance involves transferring the risk of non-repayment to an insurance organization; it is issued by an insurance policy, which can be accepted as collateral for a loan. In this case, all insurance costs are borne by the borrower. In case of non-repayment of the loan, the bank has the right to rely on compensation from the insurance company for the lost loan in accordance with the terms of the insurance policy.

Under risks in banking practice refers to the danger (possibility) of bank losses upon the occurrence of certain events.

Credit risk - the risk of a borrower's failure to pay principal and interest on the loan.

Risk management is the process of identifying and assessing them, as well as implementing a set of measures to reduce the level of risk. The risk management system allows you to organize effective management of the bank, significantly reduce the level of risks to which the bank is exposed, and increase the competitiveness of the bank.

Risk management can be represented as a series of procedures (stages):

    Stage 1 - identification, recognition of risks;

    Stage 2 - analysis, quantitative risk assessment;

    Stage 3 - ways to reduce or prevent risks;

    Stage 4 - risk control.

The following main ones are distinguished ways to minimize credit risk:

I. technical (introduction of technical devices, elimination of risks through prohibitions, etc.)

II. legal, incl.

1. insurance - based on a joint arrangement of possible risks (loan insurance, deposit insurance).

3. penalty (fine, penalty)

4. surety (guarantee, aval)

5. deposit, advance payment

III. methods of risk management associated with their forecasting:

    taking into account external risks (industry, regional...)

    compliance with mandatory economic standards established by the Central Bank (liquidity ratio, capital adequacy ratio, maximum risk ratio per borrower, etc. - in accordance with the Instruction of the Central Bank of the Russian Federation dated January 16, 2004 No. 110-I “On mandatory standards for banks”)

    analysis of the client’s financial condition, payment and creditworthiness

    use of the principle of diversification

5. creation of special reserve funds (reserve for possible loan losses, etc.)

7. limiting (for example, setting a limit when concluding an overdraft agreement, etc.

Creating a reserve for possible loan losses

In accordance with the Regulation of the Central Bank of March 26, 2004 N 254-P “On the procedure for the formation by credit institutions of reserves for possible losses on loans, for loan and equivalent debts”, credit institutions are required to create reserves for possible loan losses (RVLP) . The reserve is formed when the loan is impaired, i.e. if the loan loses its value due to the borrower’s failure to fulfill or improper fulfillment of its obligations under the loan in accordance with the terms of the loan agreement or the existence of a real threat of such failure.

The credit institution independently determines the amount of the reserve based on professional judgment regarding the assessment of the quality of the loan portfolio. The loan quality is assessed based on an analysis of the results of an assessment of the borrower’s financial situation.

Five classification categories of loan quality are established. Loans classified as quality categories II - V are impaired; for them, a RVPS must be created. For group 1, a reserve may not be created.

Classification of loans according to their quality category

Loan name

The amount of the estimated RVP of the principal amount of the loan, in %

Signs

Standard

absence of credit risk: (with the exception of loans for which information about the borrower is unknown - i.e. there are no results of a quarterly analysis of the borrower’s financial position, etc., the bank cannot make a professional judgment about the degree of credit risk)

Non-standard

moderate credit risk

(e.g. lack of information about the borrower for more than 1 quarter)

Doubtful

From 21 to 50%

significant credit risk (for example, lack of information about the borrower for more than 2 quarters)

Problematic

From 51 to 100%

high credit risk

Hopeless

there is no likelihood of loan repayment due to the borrower’s inability or refusal to fulfill loan obligations

The reserve is formed in the currency of the Russian Federation (regardless of the currency of the loan) within the amount of the principal debt. The creation (regulation of the amount created) of the reserve is carried out for the entire period as long as the client’s loan debt exists. Assessing the quality of the loan and, if necessary, adjusting the reserve (i.e. if there are grounds for reducing the quality category) is carried out within the following time frames:

    for loans provided to individuals, as well as legal entities that are not credit institutions - at least once a quarter

    for loans provided to credit institutions - at least once a month.

When receiving information about a change in the financial situation of the borrower, poor-quality storage of the collateral and other credit risk factors, the bank must adjust the reserve as the category of loan quality changes (the real value of the collateral is established on the basis of the most cautious (conservative) estimates regarding both the direct value of the collateral and and the period for its sale, that is, based on the lowest possible price and the longest possible period for the sale of the property).

    borrower's financial situation

    quality of debt servicing.