Send your good work in the knowledge base is simple. Use the form below

Students, graduate students, young scientists who use the knowledge base in their studies and work will be very grateful to you.

Posted on http://www.allbest.ru/

PRIVATE INSTITUTION

PROFESSIONAL EDUCATIONAL ORGANIZATION

“KUBAN COLLEGE OF CULTURE, ECONOMICS AND LAW”

COURSE WORK

GOS SPO 38.02.07 3B-13-9

ORGANIZATION OF CREDIT MONITORING IN A BANK

Vozisova Anastasia Sergeevna

Head E.V. Kasakova

Krasnodar 2016

Introduction

Chapter 1. Economic foundations of credit monitoring

Chapter 1.1 Organization of credit monitoring in commercial banks

Chapter 1.2 Credit monitoring as a credit risk management system

Chapter 2. Analysis of lending conditions using the example of Kuban Credit Bank

Chapter 2.1 Organizational and economic characteristics of the bank

Chapter 2.2 Analysis of the bank’s credit policy

Chapter 2.3 Analysis of the borrower’s creditworthiness using the example of an individual. faces

Chapter 3. Improving the credit monitoring mechanism

Chapter 3.1 Problems of organizing credit monitoring in banks

Chapter 3.2 Ways to improve credit monitoring to reduce credit risks

Introduction

Conclusion

credit bank monitoring

Introduction

Credit monitoring is the bank's control over the use and repayment of a loan. The Bank regularly monitors the intended use of the loan and compliance with other terms of the loan agreement. To do this, the bank checks the current state of the borrower's financial and economic activities and, if necessary, conducts audits at the borrower's enterprise.

When investing in securities, the bank pursues two goals: generating income and providing liquidity. In order to minimize risks related to securities, banks make investments in different types of securities in terms of reliability, maturity, profitability, issuer, i.e. diversify the securities portfolio (stock portfolio).

Relevance of the research topic. The current state of the Russian banking system is characterized by the consolidation and development of the trend towards the restoration of banking activities. In the field of lending, the structure and quality of assets of credit institutions has improved, which is reflected in the growth of loans to the real sector of the economy, a decrease in overdue debt, and a general improvement in the quality of the loan portfolio. Despite the apparent improvement in the situation, the banking system is poorly protected from numerous risks, including credit risks. Among the main reasons hindering the creation of an effective system for protecting the banking system from credit risk, one can highlight reasons related to the organization of work in the Bank of Russia when carrying out credit monitoring of commercial banks and with the conduct of credit monitoring in commercial banks themselves. These reasons are largely due to the lack of development of the problems of both banking monitoring in general and credit monitoring.

The purpose of this study is to clarify the essence of credit monitoring, assess the state of credit monitoring in banking and determine ways to improve it.

Research objectives. To achieve this goal, it was necessary to solve the following problems and find out its structure:

Explore the theoretical foundations of credit monitoring, revealing its essence and place in the banking monitoring system;

Assess the organization of credit monitoring of commercial banks;

Determine the directions for conducting credit monitoring in a commercial bank and in the Bank of Russia;

Conduct an analysis of banking practices in organizing and conducting

credit monitoring;

Identify some ways to improve credit monitoring in banking.

The subject of the study is the current practice of organizing and conducting credit monitoring.

The object of the study is Kuban Credit Bank and Russian commercial banks.

The degree of elaboration of the topic in literature. Assessing the degree of elaboration of the topic, it should be noted that to date there are practically no works devoted to a comprehensive study of the essence of credit monitoring, goals, objectives and organization of its implementation. At the same time, the importance of its implementation is emphasized by many economists. The bulk of the research concerns only certain aspects of the activity of monitoring and managing credit risks. Separate studies of credit monitoring issues are found in the works of the following authors: Batrakova L.G., Vasilishen E.N., Marshavina L.Ya., Olynany A.I., Platonov V., Higgins M. and some others. Since the process of researching issues of credit monitoring touches upon general theoretical aspects of banking monitoring, credit risk monitoring, loan portfolio monitoring, and credit policy monitoring, the scientific works of O.N. Antipov, Yu.A. Babicheva, and G. Beloglazova are also of great importance for this study. N., Belyaeva M.K., Buzueva A.V.,

Bora M.Z., Zhukova E.F., Ivanova V.V., Korobova G.G., Krasavina L.N., Lavrushina O.I., Lobanova A., Nesterenko E.A., Panova G.S. , Rose Peter S., Sokolinskaya N.E., Filin S., Chugunova A., Shora K., Shulkova N.N., Yampolsky M. and others.

1. Economic basis of credit monitoring

1.1 Organization of credit monitoring in the bank

Monitoring of a credit institution is a system of external control over the credit operations of banks, carried out as part of the supervisory activities of the Bank of Russia.

It includes:

· analysis of the bank's loan portfolio, identification of violations and development of recommendations for its adjustment;

· analysis of compliance with standards, limits, requirements for the formation of reserves;

· checking the implementation of control over the execution of loan agreements;

· organizing work with overdue debts;

· assessment of the work of the bank’s credit division and the Credit Committee;

· checking the correctness of reflection of credit transactions in accounting accounts.

In the lending process, when carrying out banking monitoring, the bank should pay special attention to the following aspects:

Compliance with the principles of bank lending;

Monitoring compliance with the terms of the loan agreement;

Control over the intended use of loan funds;

Monitoring of credit collateral and verification and storage of pledged property;

Loan repayment analysis;

Identification of problem loans and development of measures to eliminate such debt;

Analysis of the quality and structure of the bank’s loan portfolio as a whole;

Monitoring credit risk and developing measures to minimize it

To ensure successful and uninterrupted lending activities, each bank must have its own system of intra-bank monitoring of credit operations and clearly identified the most qualified and experienced bank employees, and exercise credit control at all stages of the lending process.

In banking practice, various methods of credit monitoring are used, based on several basic principles:

1) periodic inspection of all types of loans (every 30–60.90 days all large loans and selectively small ones are checked);

2) careful development of credit control stages in order to ensure verification of all the most important conditions of each credit transaction, including:

Compliance of actual loan payments with calculated data;

Quality and condition of loan collateral;

Completeness of relevant documentation;

Assessment of changes in financial condition and forecasts regarding an increase or decrease in the borrower’s needs for a bank loan;

Assessing the compliance of the provided loan funds with the bank’s credit policies and standards developed by regulatory authorities for its loan portfolio;

Credit monitoring can be classified according to certain criteria:

1) by scope of implementation:

Internal monitoring, in which control is carried out mainly on documents that correspond to one or another stage of the lending process, and the degree of credit risk is assessed;

External monitoring, which includes meetings and negotiations with borrowers who have fallen behind on payments; telephone calls, correspondence; counter checks on the movement of goods purchased using credit funds, on-site inspection checks, negotiations with guarantors, etc.

2) by the nature of the conduct:

Preliminary monitoring, which involves checking the compliance of credit activities with legal requirements, the availability of appropriate permits, limits, etc. for the provision of credit funds includes analysis of loan documentation, assessment of the borrower’s financial condition and analysis of the loan project, assessment of the collateral for the loan, etc. The main idea of ​​preliminary credit monitoring is to determine the real risk for the bank and make an effective decision on providing a loan to the borrower;

Current monitoring consists of the bank monitoring the fulfillment of the terms of the loan agreement by the borrower after making a decision to provide a loan and issuing credit resources. The main idea of ​​​​current monitoring is to determine the risk of losses for a banking institution due to the borrower’s inability to repay the debt and pay interest for its use. At the same time, timeliness is checked repayment of credit debt by the borrower, changes in its financial condition and economic activities are determined, the client’s fulfillment of the terms of the loan agreement for the intended use of loan funds is analyzed, the quality of the property provided as collateral is assessed, etc.;

The next (further) monitoring of the bank’s credit activities is to ensure a systematic check of the state of the organization of the bank’s credit activities, the correctness of registration, proper registration and completed credit transactions. In the process of such control, it is necessary to find out the reasons for violation of the rules for conducting credit activities and take appropriate measures to eliminate them;

3) depending on the implementation methods:

Remote monitoring;

Inspection monitoring;

4) depending on the scale of supervision:

Local;

Regional;

National;

Global;

5) depending on the coverage area:

At the level of the loan portfolio as a whole - the main goal (timely identification of signs, facts, changes or their trends characterizing the state of the loan portfolio as such, which can lead or has already led to an increase in risks and negatively affect the bank’s performance, as well as the development of proposals for improving the state of banking lending activities;

At the level of an individual loan agreement, the goal is to timely identify deviations in the process of lending to a specific borrower at all its stages; identifying the reasons for these deviations and developing proposals for correcting mistakes.

6) depending on the groups of borrowers, monitoring of loans provided is distinguished:

Borrowers - legal entities;

Borrowers - individuals;

Borrowers - banks;

Borrowers - non-bank financial institutions;

Groups of related persons of the bank;

Borrowers - government bodies

The main areas of bank credit monitoring can be identified:

1. Monitoring the borrower’s compliance with the terms of the loan agreement, collateral agreements and other obligations that were accepted by him in connection with the conclusion of the loan agreement

2. Control over the intended use of loan funds by the borrower

3. Monitoring changes in the borrower’s financial condition and identifying changes in its business activities, periodically assessing the borrower’s guarantors

4. Monitoring the quality of accepted loan collateral and checking the storage of pledged property

5. Analysis of the quality and structure of the bank’s loan portfolio as a whole to identify problem loans and develop measures to eliminate debt.

1.2 Credit monitoring as a credit risk management system

The increase in the volume of transactions and the emergence of new forms of credit relations against the backdrop of changing regulatory standards require banks to improve the quality of management of credit activities and revise the approaches underlying the formation of credit monitoring, which, being one of the most important components of credit policy, must adapt new economic conditions and the needs of economic entities to the overall development strategy of the bank and develop adequate standards for managing the credit process and credit risk. Credit monitoring in a commercial bank can be effective only if it is scientifically based and formed in accordance with the laws of economics and the laws of managing the bank's activities.

Thus, the comprehensive development of theoretical and practical issues that reveal all aspects of the formation and implementation of credit monitoring in a commercial bank is an important and pressing problem of the modern Russian banking system.

The entire international banking community is concerned about the problem of loan repayment; its importance has now increased. For Russia, it is associated with the presence of problem loans, the volume of which increased with the intensification of the credit policy of banks. Figure 1 shows the dynamics of overdue debt on loans, deposits and other placed funds.

One of the ways to minimize the credit risk of banks is to create an effective banking control system. An integral part of this problem is the timely identification and organization of work with problem loans.

Credit monitoring is a complex information and analytical system that includes monitoring the quality of loans provided, its assessment and forecasting of future development for organizing timely and adequate management decisions that reduce credit risk at all stages of working with a loan.

We can distinguish two main features of credit monitoring objects, the first of which is their dynamism, and the second is the presence or possibility of danger arising in the process of functioning of the monitoring object. Therefore, credit monitoring must be identified primarily as a multifactor process aimed at reducing the risk of credit operations and preventing negative operations associated with the emergence of difficulties in the process of loan repayment.

The main difference between a monitoring system and a control system is in predicting the future development of objects.

The information and analytical base for conducting credit monitoring in commercial banks is formed from information coming from various sources:

Data provided by the borrower. These include an application for a loan, a borrower's questionnaire, legal documents, financial documents, information about the loan object, information about the loan security.

Intra-bank information that exists under the conditions of the bank’s unified information field (credit history in a given bank, data on the movement of funds in the borrower’s accounts, the quality of debt servicing, information received by the credit officer when visiting the borrower’s office or production facility).

Information received from third parties, including:

Regulatory and supervisory authorities (tax office, registration chambers and licensing authorities);

credit institutions servicing this borrower;

judicial authorities;

Media, Internet;

credit history bureau.

It is very important that this information is constantly updated, as otherwise emerging signs of credit problems may go unnoticed.

An adequate system for identifying, assessing, monitoring and controlling credit risks is an integral element of credit policy. Credit risk refers to the likelihood of loss of liquidity and/or financial losses due to the borrower’s untimely fulfillment or failure to fulfill its obligations as a result of various internal and external factors. The specificity of the system for organizing credit risk monitoring is that unsatisfactory government control and weak corporate governance are the reasons for limited financial transparency, which makes it difficult to correctly assess risks.

The credit risk to which a commercial bank is exposed depends on a number of factors characterizing the loan portfolio and the bank's credit policy. The main ones among these factors are the following:

the degree of diversification of the loan portfolio by borrower, region, industry (the higher the diversification, the lower the risk; the higher the concentration of the loan portfolio, the higher the risk);

share of overdue loans in the portfolio (including implicit and restructured overdue debt);

loans to non-traditional areas of business (which increases credit risk due to the inability to predict how the business will develop in the future);

the share in the loan portfolio of new borrowers who do not have a credit history (also contributes to a potential increase in the risk of loan non-repayment due to the fact that the borrower may turn out to be unscrupulous);

pledge of illiquid and low-liquid assets (the risk of difficulties arising if it is necessary to sell the pledge increases);

organization of lending in a bank as a technological process.

The main area of ​​practical application of monitoring is management, or more precisely, information services for management in various fields of activity. Monitoring is a rather complex and ambiguous phenomenon. It is used in various fields and for various purposes, but at the same time has common characteristics and properties.

2 Analysis of lending conditions using the example of Kuban Credit Bank

2.1 Organizational and economic characteristics of the bank

Commercial bank "Kuban Credit" limited liability company is one of the most actively developing banks in the Krasnodar region, successfully operating in the financial market of the region since 1993. General license No. 2518 of the Bank of Russia.

A wide network of 65 additional, 3 operational offices and 1 branch located in the Krasnodar Territory, Rostov Region, Republic In addition, 140 cash desks for accepting payments from the population, 76 currency transaction cash desks operate in the region, including 24 hours a day at the following addresses: Krasnodar, st. Krasnoarmeyskaya, house number 32 and at the Krasnodar Airport. 71 money transfer points WesternUnion, Unistream, Zolotaya Korona, Kuban Credit - Express, including around the clock at the following addresses: Krasnodar, st. Krasnoarmeyskaya, house number 32 and at the Krasnodar Airport.

There are also 107 cash withdrawal points using bank cards and more than 180 ATMs.

Kuban Credit Bank, actively developing, constantly introduces new computer technologies. The bank's information website and other online products have been created and are actively operating.

Currently, Kuban Credit Bank provides a wide range of services to legal entities and individuals.

Kuban Credit Bank has created significant organizational, intellectual, technical and financial potential. The bank has a stable position in the financial market of Kuban, has high liquidity of assets, dynamic growth of key indicators, and a stable customer base. Kuban Credit Bank is a member of the main professional banking and business communities. The Bank is a member of the Association of Russian Banks (ARB), a member of the Association of Regional Banks "Russia", and a member of the Krasnodar Chamber of Commerce and Industry.

CB "Kuban Credit" LLC received certificate No. 269 dated December 9, 2004 on its inclusion in the register of banks participating in the compulsory deposit insurance system of the State Corporation "Deposit Insurance Agency".

CB "Kuban Credit" LLC joins the Code of Ethical Principles of Banking, developed by the Association of Russian Banks, as an act of self-regulation of the banking community of the Russian Federation based on the norms of business ethics and financial law

Since 2012, the partner of OJSC SME Bank, Commercial Bank Kuban Credit, a limited liability company, has been providing loans to small and medium-sized businesses, including through the targeted resources of the open joint-stock company Russian Bank for Support of Small and Medium Enterprises.

The main indicators of the financial and economic activities of Kuban Credit Bank are shown in Table 1

Table 1. - Main indicators of financial and economic activity

Indicators				Deviation 2014 by 2012 (+,-), thousand roubles. %
Own funds (capital),
Total income, thousand rubles.
Total expenses, thousand rubles.
Balance sheet profit, thousand rubles.
Net profit (after taxes), thousand rubles.
Income-generating assets, thousand rubles.
Return on Equity (profit / authorized capital), %
Return on assets, %
Profitability level of working assets, %
Bank profitability indicator, %
Net interest margin, %

Based on the data in Table 1, it can be seen that the bank’s own funds during the analyzed period increased by 38% (RUB 1,984,340 thousand). The bank's total income increased by 56% (1,658,486 thousand rubles), the growth rate of income exceeds the growth rate of expenses for the analyzed period, which has a positive effect on the financial result of the bank. Net profit increased by 110% (RUB 558,831 thousand). The increase in net profit was also influenced by the growth of income-generating assets; it amounted to 29% (RUB 11,058,355 thousand). The positive dynamics of the bank's income indicators influenced the growth of profitability indicators; the overall profitability of the bank increased by 6% compared to 2012 and was 23% in 2014. There is also a slight increase in other performance indicators, which generally characterizes the bank’s performance results positively. In Table 2 we analyze the impact of income and expenses on the financial performance of the bank.

Table 2 - Structure of income and expenses

	Amount, million rubles	Deviation 2014 by 2012,(+,-)
Article title				million rubles %
1. Total percent of received and similar income,
From placing funds in credit institutions
From loans provided to clients
Other sources
2. Total interest paid and similar expenses, including:
For funds raised, credit. organizations
Based on attracted funds from clients
3.Net interest income
4. Net income from transactions with securities
5. Net income from foreign currency transactions
6. Net income from revaluation of foreign currency
7. Operating expenses, thousand rubles.
8. Commission income
9. Commission expenses
10. Other net operating income
11. Profit before tax
12. Accrued taxes
13Net profit for the reporting year

The increase in the bank's total income was influenced by an increase in interest income by 52% (RUB 1,996,598 thousand). In the structure of interest income, the largest share is occupied by income from loans provided to clients and their growth is 51% (RUB 1,823,712 thousand). There has been a significant decline in income from foreign exchange transactions. Commission income also showed a significant increase during the analyzed period by 53% (RUB 338,366 thousand). In the structure of expenses, the largest share is occupied by interest expenses on attracted funds from clients in 2014; they amounted to 2,799,314 thousand rubles. and their growth was 19%. The increase in interest expenses is due to an increase in interest rates on attracted resources due to an increase in the key rate of the Central Bank of the Russian Federation.

Thus, the positive dynamics of income relative to expenses influenced the growth of the bank’s profit; during the analyzed period it grew by 110% or by 558,831 thousand rubles.

In Table 3 we analyze the dynamics and structure of assets of Kuban Credit Bank

Table 3 - Analysis of the dynamics and structure of assets

Article title				Deviation from 2014 to 2012,
Cash
Funds from credit institutions in the Central Bank of the Russian Federation
Mandatory reserves in the Central Bank of the Russian Federation
Funds in credit institutions
Net loans outstanding
Fixed assets, intangible assets and inventories
Other assets
Balance currency

According to Table 3, there was an increase in the amount of bank assets by 28.5%, which amounted to 21,107,913 thousand rubles. The main increase was shown by cash (3540 78 thousand rubles), net loans (5317288 thousand rubles), fixed assets and intangible assets (416526 thousand rubles), other assets (521016 thousand rubles)

In the structure of assets, the largest share is occupied by loan debt, but its share is decreasing (69.9-64%), which indicates a reduction in the bank’s loan portfolio. And the share of cash increases by 4.8%. Other changes in the asset structure are minor.

Table 4-Analysis of the structure and dynamics of resources

Article title				Deviation of 2014 from 2012
Loans from the Central Bank of the Russian Federation
Funds from credit institutions
Client funds, including:
Individuals
According to current income tax
Debt issued
Other obligations
Reserves for possible losses on contingent credit obligations, other losses, etc.
Total liabilities
Participants' funds
Funds and unused profits from previous years
Revaluation of fixed assets
Profit for distribution (loss) for the reporting period
Total equity
Balance currency

In the bank's capital structure, equity accounts for 13%, and liabilities 87% at the end of 2014. The structure of the bank's resources does not change during the analyzed period. In the structure of liabilities, the largest share is occupied by customer funds - 83.7%, of which the share of individuals' funds is 62%. In the structure of own funds, the main share is occupied by funds and unused profits of previous years - 7.8%.

During the analyzed period, the bank's liabilities increased by 10123 73 thousand rubles. or 27.1%, their growth was mainly due to an increase in funds in the accounts of individual clients by 9,606,042 thousand rubles, or 39.4%.

The growth of the bank's own funds amounted to 38.6% or 1,984,340 thousand rubles, the increase was due to the growth of capitalized profits allocated to the formation of funds and development of the bank.

2.2 Analysis of the bank’s credit policy

The bank's strategy and tactics in the field of obtaining and providing loans is the essence of its credit policy.

The Bank, being an independent credit institution, pursues its credit policy taking into account political and economic conditions, the level of development of banking legislation, interbank competition, the degree of development of banking infrastructure, etc. The bank's credit policy includes the following elements: The availability of resources at the bank and their structure determine the implementation of the credit policy. Credit policy largely depends on the bank's liquidity. Lending is carried out in several stages, among which we should highlight: preparatory; consideration of a loan project; preparation of credit documentation; the stage of using the loan and subsequent control in the lending process. The credit policy of a commercial bank is a set of its measures, the purpose of which is to increase the profitability of credit operations and reduce credit risk. When developing a credit policy, a bank must take into account a number of objective and subjective factors:

1. Macroeconomic:

The general state of the country's economy;

Monetary policy of the Bank of Russia;

Financial policy of the Russian Government.

2. Regional and sectoral:

The state of the economy in the regions and industries served by the bank;

Composition of clients, their need for credit;

Presence of competing banks.

3. Intrabank:

The amount of equity (capital) of the bank;

Structure of liabilities;

Personnel abilities and experience.

The availability of resources at a commercial bank is the starting point for carrying out credit policy. If the credit operation turns out to be quite profitable and less risky, the bank can increase the amount of funds intended for lending. An even more noticeable influence on credit policy is exerted by the structure of funds available to banks. If a sufficient share of them is occupied by long-term resources, then the bank has greater opportunities for long-term lending. Also, credit policy depends largely on the liquidity of the bank, the ability of it to fulfill its obligations to creditors - legal entities and individuals who keep funds in bank accounts. Credit policy also depends on the bank's specialization. A bank may specialize not in credit, but in other (for example, foreign exchange) operations; then the credit policy will be less ambitious and restrained. The first stage in the formation of a bank’s lending policy is the determination of its strategic goals. After this, the bank develops principles for organizing the loan portfolio and then, based on the selected principles, determines the regulations for the execution of credit operations. The goal of a commercial bank's credit policy expresses the final result of the bank's activities and follows from its purpose - to satisfy the needs of clients in obtaining additional funds. These funds, received on a repayable basis, ensure the livelihoods of enterprises and individuals. At the same time, banks realize their own goals as a commercial enterprise - the interests of making a profit. The objectives of the credit policy of a commercial bank are of a more specific nature: they may be associated with improving the composition of bank loans, the need to accelerate their turnover, and increasing the share of secured loans. The choice of lending direction follows from the purpose of credit policy. This element is part of the commercial bank's strategy. Commercial banks can concentrate their efforts on lending services to organizations in certain sectors of the national economy. A credit policy is usually formalized in the form of a written document, which includes provisions regulating the preliminary work for issuing a loan, as well as the lending process. Each of these elements is closely related to the others. Violation of one of them inevitably leads to difficulties or losses from credit activities. A commercial bank, for example, cannot set a lending goal without exercising control and checking how it is being implemented. One of the prerequisites for reducing credit risk is diversification of the loan portfolio. Diversification rules provide for the following: to issue loans to various enterprises from different sectors of the economy in smaller amounts for a shorter period and to a larger number of borrowers. As an additional condition for reducing the risk, diversification of ensuring the repayment of loans should be applied based on a combination of various methods of ensuring the repayment of loans - collateral, guarantees, sureties, insurance. Compliance with these rules will allow you to compensate for possible losses on some credit transactions at the expense of benefits from others.

2.3 Analysis of the borrower’s creditworthiness using the example of an individual

In banking practice, when assessing the creditworthiness of an individual borrower, it is common to use the credit scoring method. Credit scoring is a statistical research method that is used by lenders to quickly and objectively assess the credit risk of a person applying for a loan. The risky result is calculated and determined in points that characterize the degree of probability of repaying the loan. The number of points varies depending on the methodology chosen by the banking institution for assessing borrowers. - individuals. The more points, the more likely the borrower is to get a loan from a bank. An important feature of the credit scoring system is that it cannot be applied according to a template, but must be developed based on the characteristics inherent in the banking institution, the bank’s clientele, take into account the banking legislation and traditions of the country, that is, it is subject to constant monitoring and modification.

Individual - Boris Aleksandrovich Chaikin works at the company Brigantina CJSC as a driver. The borrower has a family - a wife and a minor child. My wife works. Wants to take out a consumer loan of 100,000 rubles. The bank's interest rate is currently 17.5% per annum.

The total income of an individual per year is 300,000 rubles.

Monthly earnings = 300,000: 12 = 25,000 rubles per month

Taxable = 25,000*13% = 3,250 rubles per month, leaving a total of 21,750 rubles.

The living wage for an able-bodied person is 10,500

The cost of living for a child, according to statistics, is 9,500

Free balance = 21.750-10.500-9.500 = 1.750 rubles

12.352*0.7= 7.596 rubles - monthly payment limit.

Calculating in the loan calculator, the loan term will be 18 months, the amount of the first payment will be 6,957 rubles using a differentiated method of loan repayment. The bank will receive a profit of 13,313 rubles from this loan.

3. Improving the credit monitoring mechanism

3.1 Problems of organizing credit monitoring in banks

The internal control system in the bank performs a protective function. Its task is to minimize external and internal risks and ensure such a procedure for conducting banking operations and transactions that contributes to the achievement of set goals while complying with the requirements of legislation, regulations of the Bank of Russia, as well as internal procedures, standards and rules.

The legal field of the internal control service is determined by the regulation of the Bank of Russia “On the organization of internal control in banks” dated August 28, 1997 No. 509. Direct actions aimed at minimizing the bank’s risks are determined by a number of instructive acts, such as, for example, the Bank of Russia Directive dated July 7 . 1999 No. 603-U “On the procedure for implementing internal control over the compliance of activities in financial markets in credit institutions”, Resolution of the Federal Commission for the Securities Market dated July 19, 2001. No. 16 “On approval of the Regulations on internal control of a professional participant in the securities market”, rule (standards) of auditing activities “Study and assessment of accounting and internal control systems during an audit” (approved by the Auditing Commission under the President of the Russian Federation on December 25, 1996 city, protocol No. 6) and a number of other acts.

The organizational basis of the internal control system includes principles that ensure the continuous operation of control mechanisms and functions in all areas of banking activities and decision-making levels. These include, in particular, the principles:

separation of duties;

continuity;

objectivity and specificity;

objectivity;

inclusiveness and diversity;

information sufficiency for decision-making and restriction of access to information not related to the conduct of a specific operation and/or

exceeding the limit of functional necessity within the scope of job duties;

the use of various types of control depending on the functional affiliation of the objects of control, the current need and the complexity of the tasks.

The efforts of the internal control service (based on the general situation and the creation of a high-tech bank in the future) are aimed mainly at controlling:

for the creation of a unified technological structure for conducting all operations and customer service;

for creating compliance of the technological structure, formalized in the form of regulations, orders, instructions, methods, procedures, with the actual practice of the bank;

for adequate banking accounting, as well as the creation and effective functioning, within the framework of a single technological structure, of mechanisms for subsequent control over banking operations;

for compliance of internal regulations, orders, instructions, methods, procedures with external legislation.

When talking about control, you should clearly understand its types. As a rule, these are administrative and financial controls. Administrative control consists of checking the compliance of operations and transactions with the powers of officials defined by bank regulations and procedures for making and implementing decisions. As a result of financial control, the compliance of ongoing operations and transactions with the bank’s policies set out in regulations, their adequate accounting and reporting is verified. It is important that both administrative and financial control determine the effectiveness of the bank’s risk management system and the measures taken to identify and minimize risks. The internal control service of the bank's parent organization must organize interaction with territorial internal control units and develop internal regulations regulating the procedure for such interaction. It is necessary that territorial internal control groups be independent of the branch management. This will eliminate the possibility of influence of the branch management on their activities; however, the above also applies to the internal control service of the parent organization. It is desirable that she have the opportunity to “access” the bank’s Supervisory Board.

Conclusion

Based on the research we have presented, namely its essence, assessment and paths, the following conclusions and recommendations are made.

1. In the economic literature there is no single position regarding the definition of the essence of credit monitoring.

2. It is proved that when studying the essence of credit monitoring, one should proceed from the specifics of the concept of monitoring and the concept of banking monitoring. The specificity of the concept of monitoring is that it represents continuous observation and analysis of economic objects. The concept of banking monitoring is a complex information system that includes monitoring the state of the banking sector, assessing its results and forecasting the future development of the country's banking system and individual commercial banks. In addition, when determining credit monitoring, one should take into account the specifics of the credit activities of banking institutions and the peculiarities of the structure of the banking system.

3. Based on the accepted theoretical position, the work gives the following definition of credit monitoring. Credit monitoring is a system of continuous monitoring, assessment and forecasting of the credit activities of banking institutions, both by the bank’s internal control services and by external supervisory authorities.

4. Consideration of monitoring as a system allowed the dissertation author to highlight the following elements: organization of credit monitoring, directions of credit monitoring and its content.

5. Analysis of the organization of credit monitoring in commercial banks showed that the existing system here consists of the following elements:

Information base for credit monitoring in commercial banks;

Structural divisions of commercial banks carrying out credit monitoring observations;

Processing and analysis of information about borrowers of a commercial bank;

The mechanism of influence of a commercial bank based on the results of credit monitoring;

6. An analysis of the organization of credit monitoring of commercial banks at the Bank of Russia showed that the system in force here includes the following elements:

Structural divisions of the Bank of Russia that carry out credit monitoring observations; information base for assessing the lending activities of commercial banks in the Bank of Russia;

Processing and analysis of information on the lending activities of commercial banks;

Mechanism of influence of the Bank of Russia based on the results of credit monitoring;

Development of forecast calculations.

7. The course work proves the need to create a credit monitoring committee in commercial banks and proposes its organizational structure. Committee tasks:

Monitor credit risk, loan portfolio, credit policy;

Coordinate work on credit monitoring in the bank;

Generate complete, reliable and timely information on the results of credit monitoring.

The structure of structural units for credit monitoring, the composition and procedure for their activities will be different for large, medium and small banks. Each commercial bank, when deciding on the feasibility of creating such a division, must proceed from its financial position, the volume of transactions performed and the economic efficiency of the activities of such divisions

8. The course work substantiates the need to improve the organization of credit monitoring of commercial banks in the Bank of Russia. The author believes that it is advisable to create a credit monitoring department in the Bank of Russia as an integral part of the organizational structure of credit monitoring. In this regard, an organizational structure for credit monitoring of commercial banks in the Bank of Russia has been developed

9. The central place in the work is given to the main directions of conducting credit monitoring observations, namely: monitoring of credit risk, loan portfolio, credit policy.

10. In order to improve credit risk monitoring, commercial banks have developed a credit risk monitoring system.

11. The work shows that in order to improve the quality of monitoring the credit risk of commercial banks in the Bank of Russia, it is necessary to move from formal restrictions and regulations to risk regulation by taking into account, when determining the requirements for credit institutions, such parameters as:

Significance of risks;

Quality of intrabank credit risk monitoring systems;

The degree to which a credit institution assesses the size of a possible credit risk.

12. An analysis of the practice of monitoring credit policy in commercial banks showed the need to introduce a system of effective control over their activities. The work notes that Russian banks have already done significant work to improve their credit policies, but there are still more unresolved problems.

13. To improve the monitoring of the credit policy of commercial banks in the Bank of Russia, it is necessary to pay special attention to banks’ compliance with mandatory standards, as well as timely take measures based on the results of consideration of monthly balances and certificates provided by commercial banks.

These are some possible ways to improve credit monitoring in banking. Implementation will improve the quality of credit monitoring both in commercial banks and in the Bank of Russia. At the same time, I would like to note that the recommendations we offer are not the only and absolutely indisputable. Since the research was carried out within certain boundaries, this course work solved the problem of determining the basis of such a complex problem as monitoring the lending activities of commercial banks.

List of used literature

On banks and banking activities in the Russian Federation: Federal Law of 02/03/1996 No. 395-1 (as amended on 07/28/2004, as amended on 12/29/2006) // Collection of legislation of the Russian Federation. 1996. No. 6. P. 492.

On the Central Bank of the Russian Federation (Bank of Russia): Federal Law No. 86-FZ dated July 10, 2002 (as amended on October 19, 2011, as amended on November 21, 2011) // Collection of Legislation of the Russian Federation. 2002. No. 28. P. 2790.

On the procedure for credit institutions to form reserves for possible losses on loans, on loan and equivalent debt: Regulations of the Bank of Russia dated March 26, 2004 No. 254-P // Bulletin of the Bank of Russia. 2004. No. 28. P. 31-46.

On the procedure for the provision (placement) of funds by credit institutions and their return (repayment): Regulation of the Bank of Russia No. 54-P dated 08.31.98 (as amended by No. 144-P dated 07.27.01) // Bulletin of the Bank of Russia. 1988. No. 73 (573). pp. 17-30.

Arokov P. Stages of obtaining a loan // Financial management. 2010. No. 8. pp. 65 - 69.

Artyukh K.Yu. Risks of non-fulfillment of loan agreements and legal means of minimizing them: the practice of lending to small businesses in the Russian Federation within the framework of the Program of the European Bank for Reconstruction and Development // Banking Law. 2009. No. 2. P. 10-14

Banking system of Russia. Banker's Handbook: Textbook // Ed. count A.G. Gryaznova, O.I. Lavrushin, G.S. Panova et al., M.: UNITI, 2005. 527 p.

Posted on Allbest.ru

...

Similar documents

Management system and methodology for analyzing credit risk. Bank credit policy. Organizational structure and characteristics of the Muromtsevo branch No. 2257 of Sberbank of the Russian Federation. Ensuring repayment of bank loans. Weaknesses in credit risk management.

thesis, added 09.09.2010


Credit risks as a type of banking risks. Analysis of the borrower's creditworthiness. Development of recommendations and measures for credit risk management. Classification of bank credit risk. Risk management in the bank-client system.

thesis, added 03/01/2011


Functions and principles of credit to individuals. Organizational and economic characteristics of LLC CB "Renaissance Credit", organization of the credit process. Assessment of the creditworthiness of the borrower - an individual. Problems of Russian consumer lending.

thesis, added 04/14/2014


The concept of credit risk as the main type of banking risk, methods for its assessment and optimization tools. Assessment of credit risk and activities of Kuban Credit LLC. Analysis of the credit risk of a borrower - a legal entity based on its creditworthiness.

thesis, added 03/18/2016


Information base for assessing the creditworthiness of an enterprise. Methods for assessing the borrower’s creditworthiness, used in global and domestic banking practice. Managing the process of lending to a borrower using the example of the Moscow Credit Bank.

thesis, added 09.09.2010


Analysis of credit risks in the Russian banking system. Determining the borrower's credit rating. Assessment of a bank's credit risk using a VaR model and simulation procedures using the example of the loan portfolio of Sberbank of Russia OJSC.

thesis, added 01/18/2015


Assessment and risks of an individual's creditworthiness. Credit rating indicators used by foreign commercial banks. Analysis of the bank's loan portfolio. Disadvantages and advantages of the scoring system using the example of Bank Vozrozhdenie.

thesis, added 07/15/2015


The concept and stages of formation of a loan portfolio, its structure and management process. Classification of credit risks and their impact on the formation of a commercial bank’s portfolio. Analysis of the bank's loan portfolio. Credit risk management mechanism.

thesis, added 07/10/2015


The essence of credit risk and factors influencing it. General characteristics and assessment of economic performance indicators of the bank OJSC Alfa-Bank. Analysis of the borrower's creditworthiness. Prospects and emerging problems in the field of credit risk management.

thesis, added 12/05/2014


Organizational and economic characteristics and analysis of the activities of the Barnaul branch of OJSC JSCB Vozrozhdenie. Assessment of the dynamics of performance indicators of a credit organization. Analysis of the composition of the loan portfolio and the bank's credit risk management system.

UDC 336.713:657.1

UDC 336.713:657.1

MODERN APPROACHES TO CREDIT RISK MANAGEMENT IN A COMMERCIAL BANK

Andrianova Ekaterina Petrovna senior lecturer at the Department of Money Circulation and Credit

Barannikov Anton Aleksandrovich student of the accounting and financial faculty

Kuban State Agrarian University, Krasnodar, Russia

This article examines in detail the economic essence and types of banking risks, as well as the main approaches to managing credit risk in a commercial bank, inherent in modern economic conditions.

Key words: BANKING RISKS, CREDIT RISK OF A COMMERCIAL BANK, RISK MANAGEMENT, BANKING RISK MANAGEMENT

MODERN APPROACHES TO MANAGEMENT OF CREDIT RISK IN COMMERCIAL BANK

Andrianova Ekaterina Petrovna

senior teacher of the Chair of monetary circulation and credit

Barannikov Anton Aleksandrovich

student of the Accounting and financial department

Kuban State Agrarian University, Krasnodar, Russia

In this article, the economic essence and types of bank risks, and also the main approaches to the management of a credit risk in a commercial bank, inherent in modern economic conditions are considered in detail

Keywords: BANK RISKS, CREDIT RISK OF COMMERCIAL BANK, RISK MANAGEMENT, MANAGEMENT OF BANK RISKS

The banking business around the world is one of the most important sectors of the economy. Being high-tech, it is most susceptible to ongoing changes at both the macro and micro levels. As practice shows, such changes are associated with the increasing internationalization of credit institutions and markets, the improvement of banking legislation and modern computer technologies, an increase in the level of competition, and the emergence of new banking products and services in financial markets.

Banks act as a kind of “circulatory system” of the economy, so it is important that the state’s banking system functions smoothly, stably and efficiently. The success of the economic activities of enterprises and organizations, the peace of mind and confidence of citizens in the safety of their savings largely depend on its sustainable development. The main risk for the banking system is credit risk.

Since the problem of credit risk management was not relevant for a planned economy, domestic scientists were faced with the need to solve it only with the development and establishment of a market economy. In this regard, there is an obvious shortage of scientific research by Russian analysts and banking practitioners on this issue, which has not been developed both in the applied and methodological aspects.

However, there are a number of studies by domestic scientists on the problems of credit risk management that are of great value. These are the scientific works of A.P. Algin, V.E. Barabaumov, G.S. Panova, V.A. Gamza, V.V. Glushchenko, V.V. Vitlinsky, M.A. Rogov, N.Yu. Sitnikova , S.N. Kabushkin, G.V. Chernova, I.V. Voloshin, A.S. Shapkin, A.N. Fomichev, V.S. Stupakov, G.S. Tokarenko and other scientists.

The study of modern priority areas of banking encourages the search for new ways to implement the tasks of credit security, identifying everything valuable that has been created by theorists and practitioners of banking to successfully solve the problems of credit risk management, and also predetermines the comprehensive, systematic use of the theoretical heritage of foreign scientists for objective knowledge of this management process. Suffice it to say that foreign authors of works on certain issues of financial risk management, such as G. Markowitz, M. Miller, F. Modigliani, P. Samuelson, W. Sharp, D. Tobin, R. Solow and others, were awarded for their scientific development of Nobel Prizes. Among the studies of foreign scientists, the works of L. Schuster, G. Bierman, S. Schmidt, J. Sinkey, E. Altman, P. Narayanan, F. Zhorion, G. Gupton, S. Finger, H. Mauser, D. are also significant. Rosena.

Experts identify many different types of banking risks. These are credit risk, interest rate risk, liquidity risk, risk of loss of profitability, operational risk, etc. All these risks play a significant role in determining the total amount of banking risk and each of these types of risks can be devoted to separate work. However, in our opinion, credit risk is the most significant component of banking threats, since most bank failures are caused by borrowers’ non-repayment of loans and ill-conceived bank risk policies, which is especially relevant for the current economic situation of the US mortgage lending market.

For domestic banks, this problem is doubly relevant, since the indicators of overdue and doubtful debts on their loan portfolios are two to three times higher than the level of similar indicators of banks in developed countries. Therefore, the issues of managing bank credit risk, the timely resolution of which determines the efficiency of each individual bank and the stability of the functioning of the entire banking system of the country, are of paramount importance in the current conditions.

Since national banking systems, under the influence of trends in the liberalization of banking legislation, become more open to foreign investment and create favorable conditions for the internationalization of banking business, the development of generally accepted modern international approaches to the regulation of banking activities becomes relevant. In this case, the “trendsetter” is the Basel Committee on Banking Supervision of Credit Institutions. In 2005, it adopted the new Basel Accords on capital adequacy of banks, which

are currently being implemented by national supervisory authorities in different countries. Domestic banks are also beginning to use these new approaches when managing credit risk.

In recent years, a pronounced trend in international banking has been a gradual shift away from classic banking lending operations and their partial replacement with new credit products, which include derivative financial instruments or derivative products. In developed financial markets, transactions that insure credit risk through credit derivatives have become very popular.

In this regard, it is important to identify approaches to managing credit risk in the Russian economy.

A banking risk management system is a set of techniques (methods and methods) of bank personnel that make it possible to ensure a positive financial result in the presence of uncertainty in operating conditions, predict the occurrence of a risk event and take measures to eliminate or reduce its negative consequences.

This control system can be described based on different criteria. Based on the types of banking risks, in this system it is possible to distinguish blocks for managing credit risk, risk of unbalanced liquidity, interest rate, operational, loss of profitability, as well as complex blocks associated with risks arising in the process of individual areas of activity of a credit institution. In another risk classification system, subsystems for managing individual (private) risks and a block for managing aggregate risks are distinguished as independent blocks. The first block includes risk management

credit transaction and other types of bank operations, the second - risk management of various bank portfolios - credit, trade, investment, attracted resources, etc.

There are features of risk management at different levels. In accordance with this, risk management subsystems are distinguished at the level of the bank as a whole, the level of financial responsibility centers (FRC), client groups and banking products. The banking risk management system is schematically presented in Figure 1.

Based on such a criterion as risk management technology, the banking risk management system can be described as a combination of the following elements: choice of bank activity strategy,

helping to minimize risks; risk tracking system; mechanism for protecting the bank from risks.

The choice of a bank's operating strategy is carried out on the basis of studying the banking services market and its individual segments. The most risky strategies include, as is known, the leader strategy and the strategy associated with selling new services in a new market. The risk of these strategies is mitigated if the bank in other market segments continues to work with the old clientele, offering them a proven package of services. The strategy of working with U1R clients (private banking), which involves the individualization of services, is also relatively risky.

The risk tracking system includes methods for identifying (identifying) risk, risk assessment techniques, and a risk monitoring mechanism.

Figure 1 - Banking risk management system

The mechanism for protecting a bank from risk consists of current risk regulation and methods for minimizing it. At the same time, current risk management means monitoring critical indicators and making operational decisions on bank operations on this basis.

Finally, in terms of organizing the risk management process, the system under consideration involves the allocation of the following control elements:

Subjects of management;

Risk identification;

Risk assessment;

Risk monitoring.

All elements of this description of the banking risk management system, like the previous one, represent a different combination of techniques, methods and methods of work of bank personnel. Let us dwell in more detail on the individual elements of this system design.

The subjects of bank risk management depend on the size and structure of the bank. But what is common to all banks is that they include:

The bank's management, responsible for the bank's strategy and tactics aimed at increasing profits with an acceptable level of risks;

Committees that decide on the extent of certain types of fundamental risks that a bank can accept;

A division of the bank involved in planning its activities;

Functional divisions responsible for commercial risks associated with the areas of activity of these divisions;

Analytical units providing information for making decisions on banking risks;

Internal audit and control services that help minimize operational risks and identify critical indicators that indicate the possibility of a risk situation;

Legal department controlling legal risks.

Risk identification involves not only identifying risk areas,

but also the practical benefits and possible negative consequences for the bank associated with these zones.

To identify risk, as well as other elements of the risk management system, a good information base, consisting of the collection and processing of relevant information, is of great importance.

The fact is that the lack of relevant information is an important factor in any risk.

Qualitative and quantitative analysis is used to assess the degree of risk.

Qualitative analysis is an analysis of the sources and potential areas of risk determined by its factors. Therefore, qualitative analysis is based on a clear identification of factors, the list of which is specific to each type of banking risk.

The most developed criteria in the economic literature for assessing credit risk, which are known as the “si” rules: the reputation of the borrower, the ability to borrow funds, the ability to earn funds to repay the debt in the course of current activities, the borrower’s capital, loan collateral, conditions of the credit transaction, control (compliance operations legislative framework and standards).

Quantitative risk analysis aims to determine numerically, i.e. formalize the degree of risk. Schematically, the elements included in the structure of quantitative analysis are presented in Figure 2.

Criteria for assessing the degree of risk can be both general and specific for individual types of risk.

It is possible to identify criteria for assessing other types of risk:

Interest risk: the impact of interest movements on active and passive transactions on the financial result of the bank’s activities, the duration of the payback of the operation from interest income, the degree of sensitivity of assets and liabilities to changes in interest rates in a given period;

Operational risk: the impact of personnel quality on the bank’s performance; degree of error in transactions associated

with the organization and technology of the production process in the bank; the influence of external factors on the error of decisions made;

Unbalanced liquidity risk: asset quality and

liabilities, compliance of the structure of assets and liabilities in terms of amounts, terms, degree of liquidity and demand.

Quantitative analysis of banking risk

selection of risk assessment criteria 4 determination of the actual risk level based on individual methods

determination of the level of certain types of risk acceptable for the bank 4 assessment of the possibility of increasing or decreasing the risk in the future

Figure 2. - Elements of quantitative analysis of banking risks

The acceptable amount of risks of various types should be fixed through standards (limits and regulatory indicators) reflected in the document on the bank's policy for the coming period. These standards are determined based on the business plan. These include:

The share of individual segments in the bank’s asset portfolio, loan portfolio, trading and investment portfolios;

Loan to deposit ratio; level of loan portfolio quality indicators; share of overdue and extended loans; the share of interbank loans in the bank’s resources;

Level of balance sheet liquidity and capital base adequacy indicators;

Standard requirements for bank borrowers (in terms of length of participation in this area of ​​business, compliance with industry average economic indicators, balance sheet liquidity, etc.).

Risk monitoring is the process of regularly analyzing risk indicators in relation to its types and making decisions aimed at minimizing risk while maintaining the required level of profitability.

The risk monitoring process includes: distribution

responsibilities for risk monitoring, determination of a system of control indicators (main and additional), methods of risk regulation.

Responsibilities for monitoring risks are distributed between the functional divisions of the bank, its specialized committees, internal control, audit and analysis divisions, the treasury or other consolidated management of the bank, and its managers. At the same time, the bank's functional divisions are responsible for managing commercial risks, and committees and consolidated divisions are responsible for fundamental risks.

The range of control indicators includes financial ratios, limits on transactions, the structure of the portfolio of assets and liabilities, their segments, standards for the bank's counterparties (for example, for borrowers, issuers of securities, partner banks).

Regulation is a set of methods aimed at protecting the bank from risk. These methods can be divided into four groups:

1) methods of risk prevention;

2) methods of risk transfer;

3) methods of risk distribution;

4) risk absorption methods.

Figure 3. - Principles of building an intrabank risk management system

Risk management methods include:

Creation of reserves to cover losses in accordance with the types of bank operations, the procedure for using these reserves;

The procedure for covering losses with the bank's own capital;

Determination of the scale of different types of margin (interest, collateral, etc.) based on the degree of risk;

Control over the quality of the loan portfolio;

Tracking critical indicators by risk type;

Diversification of operations taking into account risk factors;

Transactions with derivative financial instruments;

Motivation of business units and personnel associated with risky operations of the bank;

Pricing (interest rates, commissions) taking into account risk;

Setting limits on risky transactions;

Sale of assets;

Hedging individual risks.

The global and domestic experience of commercial credit institutions makes it possible to formulate the principles for constructing an intrabank risk management system; this system of principles is shown schematically in Figure 3.

To build an effective banking risk management system, it is necessary:

1) taking into account the above principles for constructing a management system, formulate the management strategy and objectives in internal bank documents;

2) establish principles for identifying, assessing and diagnosing risk as the basis for setting priority strategies and objectives and ensure balanced protection of the interests of all persons related to the bank;

3) use these principles as a basis for creating the most important management control procedures, including when creating an organizational structure diagram, preparing documents on the delegation of authority, as well as technical specifications:

4) determine procedures for ensuring liability. self-evaluation and performance assessment in accordance with the principles of risk management and control systems, use these procedures as factors for improving the management process;

5) based on the above principles and procedures, a monitoring and feedback mechanism should be developed to ensure high quality procedures, evaluate and verify their compliance.

Credit operations of commercial banks are one of the most important types of banking activities. In the financial market, lending retains its position as the most profitable item of assets of credit institutions, although the most uninhibited. Credit risk, therefore, has been and remains the main type of banking risk.

Credit risk is the risk of non-fulfillment of credit obligations to a credit institution by a third party. The danger of this type of risk exists when conducting loan and

other operations equivalent to them, which are reflected on the balance sheet, and may also be of an off-balance sheet nature.

Since in practice these factors can act in opposite directions, the influence of positive factors neutralizes the effect of negative ones, and if they act in one direction, then another is possible - the negative influence of one factor will be increased by the action of another.

The listed credit risk factors can be grouped as external and internal.

The group of external factors includes: the state and prospects for the development of the country’s economy as a whole, monetary, foreign and domestic policies of the state and its possible changes as a result of government regulation. External credit risks include: political, macroeconomic, social,

inflationary, sectoral, regional, risk of legislative changes (for example, the creation of regulatory favorable conditions for providing certain types of loans and restrictions on others), risk of interest rate changes. A credit institution cannot accurately predict the level of interest, but only take into account, when managing credit risks, additional reserves to cover possible losses, both direct and hidden.

Internal factors can be associated both with the activities of the lending bank and with the activities of the borrower.

Credit risk factors are the main criteria for its classification. Depending on the scope of the factors, internal and external credit risks are distinguished; on the degree of connection of factors with the activities of the bank - credit risk, dependent or independent of the activities of the bank. Credit risks dependent on the bank’s activities, taking into account its scale, are divided into fundamental (related to the adoption of

decisions by managers involved in managing active and passive operations); commercial (related to the area of ​​activity of the Central Federal District); individual and aggregate (loan portfolio risk, risk of a set of credit transactions).

Fundamental credit risks include risks associated with collateral margin standards, decisions to issue loans to borrowers who do not meet the bank’s standards, as well as those resulting from the bank’s interest rate and currency risk, etc.

Commercial risks are associated with the credit policy in relation to small businesses, large and medium-sized clients - legal entities and individuals, and with certain areas of the bank's lending activities.

Individual credit risks include the risk of a credit product, service, operation (transaction), as well as the risk of the borrower or other counterparty.

The risk factors of a credit product (service) are, firstly, its compliance with the needs of the borrower (especially in terms of term and amount); secondly, business risk factors arising from the content of the event being financed; thirdly, the reliability of repayment sources; fourthly, the sufficiency and quality of support. In addition, credit risk factors may arise from operational risk, since in the process of creating a product and its variety - services - technological and accounting errors in documents, as well as abuse, may be made.

Factors of a borrower's credit risk are its reputation, including the level of management, operational efficiency, industry affiliation, professionalism of bank employees in assessing the borrower's creditworthiness, capital adequacy, degree

balance sheet liquidity, etc. Borrower risks may be triggered

by the credit institution itself due to the wrong choice of the type of loan and lending conditions.

The total credit risk, or the risk of a bank's loan portfolio, has its own characteristics in its management system. Features are determined, first of all, by the essence of such concepts as “loan portfolio” and “quality of loan portfolio”.

Total credit risk is the risk of a commercial bank's loan portfolio.

The main problem of credit risk management in modern conditions is the lack of a system of comprehensive and in-depth analysis of the credit process, a solid methodological base and the adoption of incorrect management decisions in conditions of incomplete information.

Due to the potentially dangerous consequences of credit risk for a credit institution, it is important to regularly carry out a comprehensive analysis of the processes of assessment, administration, monitoring, control, repayment of loans, advances, guarantees and other instruments, especially with regard to investment lending.

Therefore, the main content of the process of managing total credit risks includes assessment and analysis of the policies and practices of the credit institution and its adoption of the necessary measures in the following areas: management of the total risk of the loan portfolio; management of the organization of the credit process and operations; management of non-performing loan portfolio; assessment of credit risk management policies; assessment of policies to limit credit risks and limits; assessment of classification and reclassification of assets; assessment of the policy for reserving possible losses due to credit risks. The structure of credit risk management is schematically presented in Figure 4.

Figure 4. - Structure of credit risk management in a commercial bank

Managing the overall risk of a bank's loan portfolio primarily depends on formal credit policies. The objects of its analysis are:

1) limit on the total amount of loans issued;

2) geographical limits;

3) concentration of loans;

5) types of loans;

6) loan terms;

7) credit pricing;

8) features of the pricing policy of the credit institution;

9) credit administration and delegation of powers;

10) procedures for assessing the quality of loans;

11) maximum ratio of loan amount and individual types

12) organization of accounting and internal control over the credit process;

13) features of identifying risk groups;

14) work with problem loans;

15) financial information and credit history;

16) methodological basis of the credit process;

17) relationship with other departments of the credit institution.

Risk analysis of organizing the credit process and credit operations should include:

Credit analysis methodology and loan approval process*

Criteria for obtaining permission to issue loans, determining the policy of interest rates and credit limits at all levels of bank management, as well as criteria for accepting orders for issuing loans through a network of branches;

Collateral policy for all types of loans, current methods regarding the revaluation of collateral;

Process for monitoring and tracking loans, including responsible persons, compliance criteria and controls;

Methodology for working with problem loans;

Analysis of information technologies, flows and personnel.

Risk analysis of a non-performing loan portfolio should

include the following aspects:

Loans (including principal and interest) overdue for more than 30, 90, 180 and 360 days;

Reasons for deterioration in the quality of the loan portfolio;

Essential information on non-performing loans;

Adequacy of created reserves for possible loan losses;

The impact of loan quality deterioration on the profit and loss of a credit institution;

Measures being taken, scenarios being developed.

Analysis and assessment of credit risk management policies

includes:

Analysis of restrictions or mitigation of credit risks, for example those determining the concentration and size of loans, lending to persons associated with the credit institution or exceeding limits;

Analysis of the likelihood of repayment of a portfolio of loans and other credit instruments, including accrued and unpaid interest that exposes credit risk;

Level, distribution and importance of classified loans;

Level and composition of non-accumulating, non-performing, renegotiated, extended and reduced rate loans;

Adequacy of loan revaluation reserves;

Management's ability to manage and recover distressed assets;

Excessive concentration of loans

The adequacy and effectiveness of credit policies and procedures, as well as their compliance;

The adequacy and effectiveness of the credit institution's procedures for identifying and monitoring initial and changing risks or risks associated with existing loans, settlement procedures.

Analysis of the effectiveness of policies to limit or reduce credit risks is associated with the analysis of large loans, loans issued to persons associated with the credit institution, shareholders, insiders, lending to certain geographic regions and economic sectors, and the work of the credit institution with renegotiated debts and restructured loans.

Analysis of the risks of classification and reclassification of assets of a credit organization is the main tool for risk management and involves the analysis of asset classification standards, all cases of their revision and deviations from the standards, criteria for classification and distribution into risk groups, criteria for the reclassification of credit operations. The analysis of credit loss provisioning assessment and policy is schematically depicted in Figure 5.

Accumulation and analysis of new instruments and types of lending, methodological and documentary support and information;

Planning and organizing the activities of credit management, risk management and the internal control service of a credit institution in the direction of achieving risk minimization;

Development and selection of measures to influence the size and conditions of the allocation of funds and their use, industry and regional priorities, development of methods for assessing production, financial, commercial risks of the liquidity of a credit transaction and others

associated risks from the relevant services of the credit institution;

Analysis of the assessment and provisioning policy for credit losses

analysis of the level of losses established by the credit institution

adequacy and sufficiency of actually created reserves for possible loan losses

quality of credit instructions, techniques and procedures

analysis of work with unprofitable assets

quality of management in lending areas

loan repayment and loan collection practices

previous loss experience

changes in national

and local economic and

competitive environment

loan portfolio growth

Figure 5. - Analysis of the assessment and policy of reserving credit losses

Establishment of constant appropriate interaction between

management of the legal entity being financed and the relevant services of the credit institution: credit management,

risk management and internal control services of the bank, as well as the listed services of credit institutions with each other;

Development of standards for the actions of credit institution employees in the lending process and especially in cases of the realization of certain types of risks.

The described system must be characterized by connectivity,

the consistency of all its links and their focus on the most

the main components of risk and its crediting by highlighting significant dependencies and samples.

The second important quality of a lending risk management system is its stability. Monthly, quarterly and annual reproducibility, analysis and comparability of data on the progress of the lending process and the work of the relevant banking services to assess the effectiveness of their activities and participation in lending.

The third mandatory requirement for a lending risk management system is observability, i.e. the ability to record specific results, methods, monitoring techniques, and additional measures to minimize losses; the use of theoretical and methodological developments in the practical activities of credit institutions; the development of special indicators for assessing the effectiveness of progress; credit process and the functioning of credit management, risk management and internal control services of the bank in the direction of achieving minimization of lending risks.

The main disadvantages and internal risks of the lending process at the current stage of development of banking and the credit system in Russia include the lack of development of a scientifically based methodological base and the lack of internal bank methods by definition:

Client's lending needs;

The amount of security for the loan process with guarantor funds,

sponsors and guarantors;

Volume and liquidity of collateral;

The degree of reliability of the information received;

Production risk of the financed transaction (risk of shortage of raw materials, unreliability of purchased equipment, ineffectiveness of the selected technology, etc.);

Commercial risk of the credited client (risk of receiving low-quality products, lack of markets for new products, their obsolescence, refusal of buyers to purchase low-quality goods);

Financial risk (risk of incorrect determination of forecast cash flows, profits, balance sheet risks of the client being financed);

Risk of illiquidity and insufficient loan collateral;

The risk of impossibility of implementing measures to revise lending terms (changes in lending terms, collateral, revision of ownership rights to a transaction, cancellation of preferential lending conditions, revaluation of loans, etc.);

The quality of the loan transaction itself.

To major risks and financial losses from credit

organizations cite:

Poor selection and evaluation of business, financial and

production risks of the borrower, sponsor and guarantor;

Lack of responsibility of financial consulting services for decisions made by a credit institution;

Inability to resort to international loans due to

lack of an officially recognized credit rating of the enterprise - a potential borrower;

Insufficient long-term resources for lending

corpse project and the fear of credit institutions to violate

standards of economic activity;

Lack of progressive positive experience in combining various types of short-term and long-term lending to achieve investment goals;

Incorrectly chosen sectoral and regional priorities;

Poorly selected schedules for the use and repayment of borrowed funds without taking into account the actual needs of the production or construction process;

Poor and unprofessional analysis of the likelihood of repaying the loan on time, the risks of selling the borrower’s products on the market, as well as the possibility of the emergence of new competitors, the share of illegal business and unforeseen expenses of the borrower.

All of the above, in turn, contributes to the emergence of additional lending risks in the form of a low-quality credit memorandum and other documentation, unrealistic determination of the types, terms, and volumes of loans, and incorrect assessment of the risks of a specific transaction.

A significant negative aspect in the activities of a credit organization is the insufficient development of a strategy and policy for the development of lending, an organizational structure for managing the process, forms and methods of managing lending and risks, information, analytical, technical, personnel support for the lending process, distribution of management functions, powers and responsibilities, quantitative and qualitative limitations of credit risks, corporate lending culture.

Based on the above, we can highlight the main directions for reducing lending risks:

Introduction of a mandatory requirement on the part of the Bank of Russia to

inclusion of government directions of monetary policy

policies in the credit policy of each credit institution;

Creation and provision of a unified regulatory framework for all banks;

organizing assistance from the Bank of Russia and other government agencies in developing mandatory regulatory requirements for methodological support of various types and forms of lending;

introduction of an appropriate mandatory coefficient of total credit risk with the development of its maximum values ​​when lending to certain sectors of industry and the national economy. To derive it, indicators such as the coefficient of internal profitability of the transaction and the rate of return, the break-even point and payback of the loaned transaction, cash flow discounting and calculation of the net cash flow from the implementation of the loaned transaction and determination of its net value, measurement and assessment of the social consequences of lending can be used. , (for example, within the framework of consumer loans and mortgage lending), calculation of the internal rate of return of bank funds;

establishment of constant appropriate interaction between the management of the borrower being financed and the relevant services of the credit institution: credit management, management

risks and internal control services of the credit institution, as well as the listed services of the credit institution with each other.

Credit risks are the most common cause of bank failures, and therefore all regulatory authorities set standards for credit risk management. To protect international financial markets, key standards are also spelled out in international agreements that are aimed at unifying national approaches to credit risk management. Despite

innovation in the financial services sector, credit risk still remains the main cause of banking problems. More than 80% of the content of banks' balance sheets is devoted to this aspect of risk management. In addition to classic lending, increasing competition is forcing suppliers to enter into contracts with deferred payment, thus expanding the customer base. Trading and manufacturing companies often find themselves in the role of a creditor, but this requires additional working capital, which over time can become a problem for business expansion.

The main task facing banking structures is to minimize credit risks. To achieve this goal, a large arsenal of credit risk assessment methods is used. Banking analysts face the difficult task of determining which methodology and at what time it is appropriate to use to assess credit risks.

Huge non-payments in the country at present are associated with underestimation of credit risks, with the uncivilized approach of banks to their credit policy at the beginning of the development of market relations. When considering the economic situation of a potential borrower, literally all points are important, otherwise the bank may suffer huge losses. Bank credit departments need to constantly take into account and analyze foreign and ever-increasing Russian experience.

Bibliography

1. Blank I.A. Financial risk management M.: Nika-Center, 2006. - 448 p.

2. Vince R. Mathematics of capital management. Methods of risk analysis M.: Alpina Publisher, 2012. - 408 p.

3. Volkov A.A. Risk management in a commercial bank M.: Omega-L, 2012. -160 p.

4. Vorobyov S.N., Baldin K.V. System analysis and risk management in an organization M.: MODEK, 2009. - 760 p.

5. Dimitriadi G.G. Risks of managing a bank in St. Petersburg: LKI, 2010. - 240 p.

6. Ermasova N.B. Risk management of an organization M.: Scientific book, 2011. - 120 p.

7. Ilyichev A.V. Fundamentals of analysis of the effectiveness and risks of target programs M.: Scientific World, 2009. - 322 p.

8. Kovalev P.P. Ways to improve the effectiveness of credit risk management in a commercial bank Abstract. dis. for the job application uch. Art. Ph.D. M.: RUDN, 2006. - 24 p.

9. Krichesvsky M.L. Financial risks M.: KnoRus, 2012. - 248 p.

10. Leonovich L.I., Petrushina V.M. Risk management in banking M.: Dikta, 2012. - 136 p.

11. Marenkov N. L. Anti-crisis management. Control and risks of commercial banks and firms in Russia M.: URSS, 2002. - 360 p.

12. Nikonov V. Risk management. How to earn more and lose less M.: Alpina Publisher, 2009. - 288 p.

13. Chereshkin D. Security risk management St. Petersburg: Lenand, 2012-200 p.

14. Chetyrkin E.M. Financial risks M.: Delo ANKh, 2008. - 176 p.

15. Shapkin A.S. Economic and financial risks. Valuation, management, investment portfolio M.: Dashkov and Co., 2010. - 544 p.

16. Shatalova E. P. Assessment of creditworthiness in banking risk management M.: KnoRus, 2012. - 168 p.

To reduce the likelihood of counterparties failing to fulfill their obligations to fully repay the principal amount of the debt and interest on it within the terms established by the agreements.

Credit risk is a complex concept that includes both risks associated with the borrower and internal risks.

Credit risk management is carried out by:

Legislative and regulatory bodies establishing liquidity standards, etc.;

Supervisory authorities (central banks) that monitor compliance with laws and regulations and assess risk management;

Shareholders appointing the board of directors, top management of the organization, auditors;

The board of directors, which has day-to-day responsibility for the business, determines credit policies, risk management measures and procedures;

Internal and external auditors who assess compliance with the parameters of the credit policy and also provide opinions on its effectiveness;

Loan terms;

Collaterals provided.

The third way to manage credit risks is reserving, creating special funds to cover possible losses based on the calculated assessment of credit risk.

In addition, insurance and hedging may be used to reduce risks.

Currently, credit risk management is carried out not only at the stage of portfolio formation. Credit institutions constantly monitor the loan portfolio and optimize it, replenishing or, conversely, getting rid of part of the assets through assignment agreements (cession). Thus, a secondary loan market emerges, allowing for even more active management of credit risks.

MINISTRY OF EDUCATION AND SCIENCE OF THE RUSSIAN FEDERATION

Federal State Budgetary Educational Institution

Higher professional education

"Kuban State University"

(FSBEI HPE "KubSU")

Department of Economic Analysis, Statistics and Finance

GRADUATE WORK

Assessment of credit risks of a commercial bank

The work was performed by Alina Eduardovna Chernova

Scientific adviser:

Ph.D. econ. Sciences, Associate Professor A.R. Bazilevich

Krasnodar 2015

Introduction

1. Theoretical foundations of credit risk in modern conditions

1.1 The concept of credit risk as the main type of banking risk

1.2 Methods for assessing credit risk

1.3 Tools for optimizing credit risk

2. Assessment of credit risk and activities of Kuban Credit LLC

2.1 Organizational and legal characteristics of Kuban Credit LLC

2.2 Analysis of the financial activities of a commercial bank

2.3 Methods for assessing credit risk at Kuban Credit LLC

2.4 Analysis of the credit risk of a borrower - a legal entity based on its creditworthiness

3. Improvement of credit risk assessment in the bank Kuban Credit LLC

3.1 Optimization of credit risk assessment in a commercial bank

3.2 Regulation of credit risk based on the use of credit derivatives

Conclusion

List of sources used

Introduction

Assessing credit risk is the most pressing task for credit institutions. Depending on the client’s classification into risk groups, the bank decides whether to issue a loan or not, what credit limit and interest should be set. That is, it evaluates its credit risk. The relevance of this task is difficult to overestimate, since the increasing demand for credit products from enterprises in various sectors of the national economy and increased competition in the banking services market require banks to improve mechanisms for assessing credit risk in order to minimize credit risks and at the same time improve the quality of customer service.

The volumes and terms of lending to credit institutions significantly depend on the economic situation in the world, country, and industry of the entity being financed. In accordance with such conditions, banks have the problem of reducing the credit risk of the entity being financed through a reliable assessment of the creditworthiness of borrowers. An assessment of the borrower's creditworthiness should show the borrower's future capabilities related to the fulfillment of its obligations. To reduce the level of credit risk, the bank develops its own methods, uses foreign experience, and creates its own database of borrowers, reflecting a detailed credit history.

The relevance of the topic of the thesis is that for Russian banks, credit risk indicators, characterized by overdue and doubtful debts in their loan portfolios, are two to three times higher than the level of similar indicators for banks in developed countries. Therefore, the issues of assessing bank credit risk, the timely resolution of which determines the efficiency of each individual bank and the stability of the functioning of the entire banking system of the country, in the current conditions are of paramount importance.

Today it is necessary to pay attention to credit risk management in general, as well as its assessment and regulation. Credit risk management can create added value for the banking business for its founders, as well as provide the bank with additional stability and advantages in competition in the market.

Unrealized credit risk, remaining unrecognized, can accumulate in banking portfolios for a long time and lead to the rapid onset of catastrophic consequences. Opportunities for risk regulation at this point are usually minimal.

To increase the role of proactive regulation, to achieve visibility of decisions made and their consequences on the financial result and stability of the bank, it is necessary to use cost estimates of credit risk. These assessments allow credit risk to be interpreted in terms of possible losses and the likelihood of their occurrence.

Thus, in the current operating conditions of Russian banks, it is extremely important to ensure a closer relationship between the assessment and regulation of credit risk, which requires their study as a single system.

Therefore, the purpose of this thesis research is to analyze the theory of credit risk, determine the risks associated with credit transactions, analyze management methods and risk assessment.

To achieve these goals, the following tasks must be solved:

study the basic concepts of credit risk and tools for its optimization;

explore the most common methods for assessing credit risk;

identify problems in assessing the borrower’s creditworthiness as an indicator of the level of credit risk, and identify ways to solve them;

credit risk commercial bank

identify and formulate the main directions for assessing and optimizing credit risk in Kuban Credit LLC.

When writing the thesis, publications on the problems of risk management and credit risk management by domestic authors were used, including: Yu.A. Babicheva, I.T. Balabanova, S.B. Bratanovich, H.V. Gruninga, O.I. Lavrushina, E.P. Zharkovskaya, S.N. Kabushkina, G.G. Korobova.

When studying modern methods for assessing credit risk in domestic banking practice, the legislative framework regulating the procedure for monitoring the borrower's credit risk was studied, in particular: laws of the Russian Federation, instructions, letters, and regulations of the Bank of Russia. Practical calculations were made based on a study of the activities of Kuban Credit LLC.

1. Theoretical foundations of credit risk in modern conditions

1.1 The concept of credit risk as the main type of banking risk

All banking risks can be divided into two large groups - “financial” and “non-financial”.

Traditionally, financial risks include:

a) credit risk;

b) market risk (currency, stock, interest);

c) liquidity risk.

Based on the purpose of our research, let us dwell in more detail on the study of credit risk. It is the most significant type of financial and non-financial risks inherent in credit institutions, since the main part of the assets of credit institutions represents loans and equivalent debt<#"886568.files/image001.gif">

Figure 1 - System classification of credit risks in a commercial bank

At the present stage, the above criteria are of utmost importance. They make it possible to provide the necessary comprehensive approach to assessing credit risks to a greater extent compared to the traditional approach. None of the methods used so far provides a systematic approach for a comprehensive risk assessment based on the nature of the intentional actions of the participants in a credit transaction.

There is a group of problems associated with the identification and systematization of basic factors that directly affect the occurrence of credit risk and its level, and determines the use of key indicators for assessing the actual level of credit risk. Let's consider credit risk factors (Table 1).

Table 1 - System of credit risk factors

	Risk type	Factors influencing the occurrence of credit risk and its key parameters	Key indicators assessing the level of credit risk
Specific risks	I Borrower risk 1.1 Current liquidity, availability of own working capital and economic profitability of the borrower 1.2 Subjective (reputation)	1.1 The borrower’s inability to fulfill his current obligations through regular cash receipts or through the sale of his assets 1.2 The borrower’s reputation in the business world, his responsibility and willingness to fulfill his obligations 1.3 Disadvantages and miscalculations in the preparation and execution of the loan agreement	1.1 Current liquidity, availability of own working capital and economic profitability of the borrower
	II Risk of loan collateral 2.1 Liquidity 2.2 Opportunistic 2.3 Damage or destruction 2.4 Legal	2.1 Impossibility of market sale of the collateral 2.2 Possible depreciation of the collateral during the period of validity of the loan agreement 2.3 Loss of the collateral	2.1 Lack of purchasing demand during the crisis 2.2 Growth in liquidity, presence of inflation rates
	II. I Risk of the guarantor (insurer) 2.2.1 Objective (financial ability to repay the debt) 2.2.2 Subjective (reputation) 2.2.3 Legal	2.2.1 Failure of the guarantor to fulfill its obligations at the expense of current cash receipts 2.2.2 Reputation of the guarantor in the business world 2.2.3 Deficiencies in the preparation and execution of the guarantee agreement, as well as the insurance agreement	2.2.1 Current own working capital and economic profitability of the guarantor
Systematic risks	III Systemic risk	Changes in the economic structure that may affect the financial condition of the borrower
	IV Country risk	The risk of losses incurred by the credit institution as a result of non-fulfillment by foreign counterparties of obligations under previously received loans	Inflation rate
	V Force majeure risk	Earthquakes, disasters, strikes, etc.	Changes in exchange rates

In general, risks can be divided into two main groups:

a) Specific risks. These risks depend directly on the activities of both the credit institution itself and its borrower clients. These risks are due to the ineffectiveness of the credit strategy and the methodology used by the credit institution to assess the borrower’s ability to repay the loan received in a timely manner and fulfill all the terms of the loan agreement. The bank should also pay attention to assessing the quality of the collateral provided by the borrower for its loan obligations;

b) Systematic risks. This group of risks is not directly related to the activities of the credit institution and borrowers, therefore, these risks, according to some experts, are practically unmanageable. The structure of risks and the factors that determine them considered in the work primarily reflects the assessment and unconditional consideration by the creditor bank of at least two basic elements of the bank lending process: the motivation of the borrower (the risk associated with the borrower’s economic activity) and the real security of the loan (the risk associated with the security of the actual loan granted). Identification and interrelated assessment of these two key elements allow the bank to give a balanced assessment of the risks of lending to a specific debtor.

Monitoring credit risk cannot be separated from the control of other types of risks inherent in regular banking activities.

All banking risks are closely interrelated and interdependent on each other, and influence each other.

Credit risk depends on the influence of many factors that must be taken into account when assessing and forecasting. The credit risk factor is the cause of possible losses in the value of the bank's assets, determining their nature and area of ​​occurrence.

Figure 2 shows the classification of the main credit risk factors.

Figure 2 - Bank credit risk factors

Macroeconomic factors:

a) the crisis state of the economy, a general economic decline in production, a reduction in output and sales of products due to general economic preconditions in the country (destruction of the supply and sales system, unstable market conditions, reduction in the needs of the domestic and foreign markets);

b) the likelihood of economic difficulties for the bank due to economic problems in the territory where it operates;

c) as a result of inflation, the amounts paid by the borrower when repaying the principal debt depreciate; assets lose their real original value;

d) insufficient filling of the revenue side of the federal and local budgets, which leads to unsustainable repayment of loans taken by government authorities, unstable financing of state enterprises and government programs; instability of the monetary system and financial markets;

e) incomplete formation of the banking system, its exposure to systemic risks and the emergence of situations of delay in interbank settlements;

f) lack of coordinated government policy and support for the development of sectors of the real sector of the economy, a sharp decrease in all types of investments;

g) the lack of a developed insurance system in the country, including an insurance system for natural disasters and credit risks, and the high cost of insurance services;

h) problems of obtaining reliable information. There are no specialized organizations in the field of collecting, assessing and supplying information to potential buyers (banks, business partners, creditors); information exchange between banks about the financial condition of clients, facts of insolvency, and the volume of pledged property is not developed. The necessary information about a potential client is collected by the bank independently, which takes a lot of time;

Factors related to borrowing enterprises:

a) the uncertainty of the legal status of the borrowing enterprise, the lack of licensing and patenting of activities or the expiration of their validity, which leads to the incompetence and incapacity of the subject of the transaction and the recognition of its activities in the market as illegal;

b) the weak financial condition of the borrowing enterprise, its low solvency and financial stability, loss of equity capital due to unprofitability, inability to pay off previously assumed obligations, instability of cash flows, excess of cash outflows over their inflows;

c) significant physical and moral deterioration of fixed production assets, outdated technologies, which creates the likelihood of production stopping as a result of equipment failures, accidents, and manufacturing defects;

d) the borrower enterprise does not have ownership rights to the property, including that pledged as collateral;

e) low competitiveness of manufactured products, the presence of analogous goods on the market, which predetermines difficulties in selling them due to low quality and high costs and, as a consequence, a reduction in revenue received from sales; lack of marketing research of consumer preferences, poor management of updating the range of products, pricing, promotion and sales promotion systems taking into account market requirements and competition; weak commercial performance, lack of its own sales network and stable sales channels;

f) unsatisfactory labor organization, social problems in the team, accumulated wage arrears, high staff turnover, which creates the likelihood of production stopping due to strikes and layoffs;

g) lack of interest of the enterprise management in the development of production, lack of necessary management qualifications among the top officials of the borrower enterprise;

h) the possibility of abuse by enterprise managers;

i) weak financial analysis and planning, lack of a program for the sustainable development of the enterprise in the future, insufficient economic justification for the event being financed;

j) lack of solvent buyers of products, ineffective work with debtors to repay debts.

Bank related factors:

a) the internal instructional base is insufficient, there are no precise written standards and methodological support for lending: instructions, regulations for conducting a credit operation, loan documentation, regulatory and methodological support for analyzing the financial condition of an enterprise, investment projects for production development, and qualitative assessment of business plans; there is no clearly formulated credit policy;

b) a thorough assessment of the borrower’s creditworthiness is not carried out, the requirements for the level of solvency and reliability are underestimated; information about the borrower is insufficient or unreliable, there is no credit history; there is no control over the use of received loans<#"886568.files/image002.gif">

Figure 5 - Asset structure of Kuban Credit LLC as of January 1, 2015

In general, the increase in assets over the analyzed period is a positive development trend for Kuban Credit LLC. It is important that there was a significant increase in net loan debt, as this indicates an active policy pursued by the bank.

In accordance with the Instruction of the Central Bank of the Russian Federation dated January 16, 2004 No. 110−And “On Mandatory Bank Standards” all credit institutions must comply with a number of mandatory requirements characterizing the bank’s solvency and the level of credit risk (Table 4).

Table 4 − Information on mandatory standards of Kuban Credit LLC

Indicator name	Normative value				Absolute change
					2013 to 2012	2014 to 2013
1. Adequacy of the bank’s own funds (N1)
2. Bank instant liquidity indicator (N2)
3. Current liquidity ratio (N3)
4. Long-term liquidity indicator (N4)
5. Indicator of the maximum amount of risk per 1 borrower or group of related borrowers (N6)
6. Indicator of the maximum size of large credit risks (N7)
7 Indicator of the maximum amount of loans, bank guarantees and guarantees provided by the bank to its participants (N9.1)
8 Indicator of the total amount of risk for bank insiders (N10.1)
9 Indicator of the use of the bank’s own funds to purchase shares of other legal entities (N12)

As we see, the Bank carried out in 2011−2014. its activities within the limits established by the Central Bank of the Russian Federation, liquidity indicators are quite high and have positive dynamics.

The equity adequacy ratio decreased to 13.4% by 2014, but it is 3.4% more than the minimum level, which is 10%. This decrease is due to a reduction in equity capital. Thus, as of January 1, 2015, 13.4% of risk-weighted assets are secured by equity capital.

The instant liquidity ratio (minimum 15%) tends to decrease. If at the beginning of 2012 this figure was 90.1%, then by 2014 it dropped to 73.8%. Thus, we can say that due to its highly liquid assets (cash on hand, funds in the RCC, etc.), CB LLC Kuban Credit is able to repay 73.8% of its obligations within one operating day, which in this case case indicates sufficient immediate liquidity.

An increasing trend is observed in the current liquidity ratio (minimum 50%), which increased by 17.2% by 2014. Thus, the Bank can cover 95.6% of its current liabilities with liquid assets, i.e. financial assets that can be mobilized by the Bank within 30 calendar days. As you can see, the value of the standard does not go beyond the minimum, however, current liabilities cannot be fully repaid at the expense of liquid assets.

The long-term liquidity ratio (the maximum limit of which is 120%) determines the maximum permissible ratio of the bank's credit claims with a remaining maturity of more than 365 or 366 calendar days to the bank's own funds (capital) and obligations (liabilities) with a remaining maturity of more than 365 or 366 calendar days. 365 or 366 calendar days. This standard decreased by 12.6% at the beginning of 2013 to 83.2%, thereby remaining within the established limits.

The standard for the maximum amount of risk per borrower or group of related borrowers (N6) regulates (limites) the bank’s credit risk in relation to one borrower or group of related borrowers and determines the maximum ratio of the total amount of the bank’s credit claims to the borrower or group of related borrowers to its own funds (capital) jar. The value of this indicator decreased by 2% in 2014 compared to 2013.

In 2013, there was an increase in the maximum size of large credit risks: at the beginning of 2012 - 50.4%, and by 2014 it decreased by 24.1%. The standard for the maximum amount of large credit risks (N7) regulates (limites) the total amount of large credit risks of the bank and determines the maximum ratio of the total amount of large credit risks and the amount of the bank’s own funds (capital).

The indicator of the maximum size of loans, bank guarantees and guarantees provided by the bank to its participants (shareholders) (N9.1) in 2008 is decreasing in dynamics.

The indicator of the total risk for bank insiders (N10.1) increased from 2.6% in 2012 to 2.7% in 2012 and is within the value established by the Central Bank of the Russian Federation.

Table 5 - Analysis of income and expenses of the bank Kuban Credit LLC, thousand rubles.

Title of articles					Absolute value			Absolute change		Growth rate, %
1. Operating income
2. Operating expenses
3. Total net operating profit
4. Non-operating income
5. Non-operating expenses
6. Total net non-operating profit (loss)
7. Total income
8. Total expenses
9. Gross profit

From the above data it is clear that the growth of gross profit is more influenced by an increase in operating profit, this is a positive trend, since the operating activities of the bank must occupy a predominant share for the successful functioning of the bank.

However, the Bank has a growth rate of expenses greater than the growth rate of income, this is a negative trend, and may indicate either that the bank is attracting longer-term resources during the analyzed period and placing them in long-term assets or that the bank is buying monetary resources at a high price, but places them at a lower price. Both situations are negative.

For greater clarity, we illustrate the data on income and expenses in the form of a diagram (Figure 6).

Figure 6 − Dynamics of income and expenses of Kuban Credit LLC

Although profit is one of the most important evaluation indicators, it does not always provide sufficiently objective information about the level of efficiency of the bank. It is also necessary to consider profitability indicators, the analysis of which is given in Table 6.

Table 6 - Key performance indicators of financial and economic results of the activities of the bank Kuban Credit LLC

Indicators					Absolute change
1. Overall bank profitability
2. Return on assets
3. Return on equity
4. PE/Revenue

As can be seen from the table, the overall profitability has insignificant fluctuations over the period under review.

The return on all assets by 2011 decreased and amounted to 0.02%. That is, for 1 ruble of assets there are 0.02 rubles of profit.

Return on equity (ROE - Return on Equity) by 2014 increased by 0.05% and amounted to 0.16, i.e. For 1 ruble of equity capital there are 0.16 rubles of current profit. The factor that influenced the increase in return on equity is the increase in current profit. This coefficient is of interest to founders, shareholders or shareholders, because shows the effectiveness of their investment.

The PE to income ratio tends to decrease; in 2014, it decreased and amounted to 0.05 kopecks. profit by 1 rub. bank income. A decrease in the indicator negatively characterizes the bank's management.

To summarize, we can say that in general the activities of Kuban Credit LLC are effective and stable. All standards have been complied with in accordance with Bank of Russia Instruction No. 139−I dated December 3, 2012 “On mandatory standards for banks” . The dynamics of the structure of assets and liabilities has a positive trend, although negative fluctuations are observed. The dynamics of profitability indicators in most cases tends to increase, which coincides with changes in income and expenses.

2.3 Methods for assessing credit risk at Kuban Credit LLC

The main, active work of the bank is the provision of loans; its viability depends on the state of the bank's lending business. The lending process begins with consideration of the loan application. Therefore, it is very important to be able to identify and assess credit risk at this stage. When considering a loan application, an analysis of the creditworthiness of the potential borrower is carried out. Depending on various factors, the bank makes either a positive or negative decision regarding the borrower. Thus, “bad” applications that do not meet the bank’s requirements for borrowers and have an increased level of risk are not allowed to the bank.

The main divisions of the Bank that make up the organizational structure of the risk management system are: Credit Commission, Asset and Liability Management Committee, Operational Risk Management Committee, Strategic Planning and Risk Management Department, Internal Control Department, Security Service.

Credit risk management at CB LLC Kuban Credit is carried out through:

− regular analysis of the borrower’s ability to timely repay obligations to pay interest and principal;

− setting limits for one or a group of related borrowers;

− obtaining sufficient collateral for loans provided

Its viability depends on the state of the bank's lending business. For most banks, the size of loans issued ranges from 50% to 70% of the bank’s total assets. It is the level of credit risks that determines the overall financial risk status of the bank. Therefore, there is stricter control by the CBR over the credit strategy and tactics of the bank and its loan portfolio.

Prompt and accurate assessment of credit risk is the most pressing task for a commercial bank; increasing the profitability of banking activities largely depends on its efficiency and accuracy. Credit risk assessment is the first step in the risk management system. Their minimization is based on risk assessment. In the process of assessing credit risk, the bank divides clients by risk level, on the basis of which it makes a decision on lending, and also sets a lending limit. In addition to the above, the amount of interest on the loan also depends on the amount of credit risk.

The decision to grant a loan or to issue an obligation to Kuban Credit is made on the basis of a comprehensive analysis of the following main factors of the borrower’s activities:

− legal capacity to conduct business, obtain a loan and carry out a loan transaction;

− financial and credit history of the borrower;

− current financial condition;

− the nature of the activities carried out, the strength of the position in the market;

− economic efficiency of the potentially financed project;

− assets serving as loan collateral.

The lending department is responsible for assessing all these factors and making an opinion regarding the creditworthiness and financial condition of the borrower for the final decision of the credit committee.

A comprehensive analysis of the borrower's financial condition is carried out on the basis of financial (accounting) reporting data. The following documents are considered: balance sheet, profit and loss statement, statement of changes in capital, cash flow statement, etc.

Analysis of these financial statements of the borrower reveals the borrower's creditworthiness. These documents determine the sources of loan coverage: the borrower's profit, cash on hand and in bank accounts, assets as collateral for the loan, existing other liquid assets, various guarantees and insurance. When considering the balance sheets of potential borrowers for at least the last three periods, it is necessary to trace the dynamics of development of key indicators that ultimately determine their creditworthiness.

Practice shows that the period of retrospective analysis of the borrower’s financial development should exceed the loan period by 3 times. For example, if a borrower wishes to obtain a loan for one year, then the retrospective analysis period should be three years, but with special attention to the analysis of indicators before the loan period. To do this, you can use special weighting methods. Weighting coefficients should be maximum for indicators immediately before the credit period. Next, you should use special methods for predicting creditworthiness indicators at the end of the credit period, when the borrower must repay the loan and accrued interest. Retrospective analysis begins with determining the amount of the company's net working capital, which is defined as the ratio of the total amount of current assets to short-term liabilities

A zero or positive net working capital is satisfactory. A positive indicator means that the company is operating efficiently. However, a zero value of the indicator means that the company does not have a “buffer” in case of unexpected demand for resources. The company’s management is also interested in having positive working capital, which allows them to use the released funds for the further development of the company.

The following is the calculation of the main financial indicators:

Table 6 - Main financial indicators

Coefficient name	Calculation method	Explanation
1. Current ratio	Current assets / Current liabilities	Indicates what part of current obligations on loans and settlements can be repaid by mobilizing all OBS
2. Quick ratio	(Working capital - inventory - consumables of future works) / Short-term liabilities
3. Quick liquidity ratio	(DS + short-term financial investments + Short-term DZ) / Short-term KZ
4. Absolute liquidity ratio	Highly liquid assets / Short-term liabilities	It characterizes the ability of an economic entity to mobilize funds to cover short-term debt; the higher this ratio, the more reliable the borrower
5. Financial independence ratio	Equity / Balance Sheet Currency	The normal limit for this coefficient is estimated at 0.5, i.e. K, > 0.5. The ratio shows the share of own funds in the total resources of the enterprise.
6. Debt to equity ratio	Equity / Total Liabilities	The ratio shows what part of the enterprise's activities is financed from borrowed sources of funds. Normal coefficient limit, > 1
7. Return on assets	PE / Period average of total assets
8. Profitability ratio	Profit from operating activities before taxes, dividends and interest / Revenue from sales	Characterizes the profitability of the product itself, i.e. efficiency of the enterprise's operational activities
9. Profitability ratio (for trade organizations)	State of emergency after interest and taxes / Sales proceeds.
10. Profitability ratio (for industrial enterprises)	State of emergency after payment of interest and taxes / s/s products.

Let's consider the features of the work of the bank Kuban Credit LLC in creating reserves for possible loan losses and its approaches to providing lending.

Analysis and planning of credit risks is carried out not only for ruble loans, but also for loans provided in foreign currency, precious metals, and issued guarantees. Analysis, classification, quality assessment and planning of the bank’s loan portfolio is carried out in the following stages:

− Determination of criteria and indicators for analysis and planning of the bank’s loan portfolio.

− Retrospective analysis of the bank’s loan portfolio for previous similar periods.

− Classification of loans and their quantitative and qualitative assessment by the degree of their security (secured, insufficiently secured and unsecured) and by the level of credit risk (standard or practically risk-free loans, non-standard loans with a moderate risk of non-repayment, doubtful loans with a high level of non-repayment and bad loans loans representing the bank's actual losses).

− Analysis of positive and negative factors, conditions that determine the quality of the loan portfolio.

− Development of measures to eliminate, and if it is impossible to minimize the effect of negative and maximize positive factors, conditions for improving the existing, basic loan portfolio.

− Development of new, more efficient, multi-variant loan portfolios for a new planning period with the calculation of additional bank income for each of the improved portfolio options.

− Comparative analysis, selection, approval, approval and use of the most effective loan portfolio of the bank.

− Continuous monitoring, collection of information on credit operations, systematic summing up, comparative analysis of actual data on loans with data from the planned loan portfolio and making timely management decisions to reduce risk and increase the profitability of credit operations.

Ensuring the repayment of issued loans is based on a set of economic, financial, legal and organizational measures. Sources of loan repayment can be primary and secondary. The primary source for an enterprise is formed from the proceeds from the sale of goods, works and services, its profit, and for an individual - its wages, fees and other types. The secondary source is formed through various forms of loan collateral: pledge of property, securities, precious metals and rights, various guarantees, sureties, insurance, assignment of claims, receivables of the borrower to the bank and other types. Depending on the magnitude of the credit risk, the bank may require several types of loan collateral, which must be specified in the loan agreement. Moreover, the collateral itself automatically loses its legal force if the borrower has fulfilled the terms of the loan agreement by returning the principal amount and interest due. Thus, it is not independent in nature; it is necessarily assigned to the loan. If the loan agreement is not fulfilled, the pledge of property and other assets may be transferred from the borrower to the creditor bank. When determining the amount of collateral, it is necessary to keep in mind the size of the loan issued, interest, inflation of money, and the bank’s costs for the sale of the pledged property. This means that the amount of collateral should always be greater than the size of the loan.

Methodology for determining the credit risk group.

The concept of “credit risk group” is interpreted as a classification feature of a loan product that determines the likelihood of Borrowers’ failure to fulfill their obligations to the Bank. Based on the risk group, the required amount of reserve is determined that the Bank must create for the loan product provided by it.

The client's obligations are assessed based on the following groups of factors:

quality of support;

client turnover by account and cash register;

financial condition of the client;

the client’s own funds in the financed project;

the client's expenses for the payment of interest and principal and their relationship to the client's turnover;

profitability of the client's activities;

late payment of interest and principal.

The final risk group is determined as the worst score for each indicator. This approach to assessing a risk group is due to the presence of the minimum possible values ​​of each of the indicators, only if they are met is it possible to assign them to risk groups.

For ratios that have clear numerical criteria, the Bank uses the following distribution by risk groups:

Table 7. Criteria for dividing into risk groups

The most common are Altman's "Z analysis".

What these models have in common is that through their use, the loan officer obtains a forecast of the borrower's financial condition. So, Z analysis was introduced by Altaman and Haldeman. This model is a model for identifying the risk of corporate bankruptcy. The purpose of this model is to classify a company as either bankrupt or successful. The linear model looks like this:

1, 2x1+1.4x2+3.3x3+0.6x4+1.0x5, where:

x1 = Working capital/assets;

x2 = retained earnings/assets

x3 = gross income/assets20

x4 = market valuation of capital/amount of debt

x5 = sales volume/assets

The Z-score contains an element of expectation. If the Z score is closer to the indicator of the bankrupt company, then with a conditional deterioration in its position, this company will go bankrupt.

Table 8. Scale for assessing the probability of bankruptcy according to E. Altman’s five-factor model

But the mathematical model does not take into account the role of interpersonal relationships, although in the practice of credit analysis and lending this factor must be taken into account.

In addition to the above methods, Kuban Credit LLC uses the analytical and coefficient method. In the analytical method, the credit risk of an individual loan is assessed based on the Bank’s internal methods by classifying the loan into one of five quality categories, taking into account credit risk factors:

− I (highest) quality category (standard loans);

− II quality category (non-standard loans);

− III quality category (doubtful loans);

− IV quality category (problem loans);

− V (lowest) quality category (bad loans).

In accordance with the Bank's internal documents, credit risk is assessed for loans formed in a portfolio of homogeneous loans (hereinafter referred to as PLO) with further classification of PLO into one of five quality categories.

The Bank assesses the level of credit risk of an individual loan before it is granted, and subsequently at intervals established by the Bank’s internal documents. The main criteria for assessing loans, loan and equivalent debt are: the financial condition of the borrower; quality of debt servicing, assessment of the probability of losses for a portfolio of homogeneous loans based on an analysis of the dynamics of changes in the PIC. If the qualification criteria change, the courts and PIC will be re-evaluated.

In the coefficient method, the assessment of portfolio credit risk is the calculation of relative indicators that allow assessing the level of credit risk of the bank for a portfolio of loans, loans and equivalent debt. The procedure for assessing the level of credit risk as a whole for a portfolio of loans, loan and equivalent debt is defined in a separate internal regulatory document.

Identification, measurement and assessment of credit risk is carried out by the Legal Entities Department and the Retail Business Department of the Bank on an ongoing basis in order to make appropriate management decisions to reduce the impact of credit risk on the Bank’s activities as a whole.

2.4 Analysis of the credit risk of a borrower - a legal entity based on its creditworthiness

To assess creditworthiness, the bank requires reporting documentation from a potential borrower for the previous period (report, balance sheet with appendices - for the quarter and year), and, if a more accurate verification of indicators is necessary, primary accounting documentation for a longer period. To do this, he must manage the household in such a way that by the right time he can accumulate from the profit received an amount sufficient to repay the loan and interest.

It can be difficult to accurately foresee the risk of insolvency in advance, since unexpected financial difficulties may arise at the required moment for the borrower or in his industry as a whole in the market. These difficulties may not be caused by the ineptitude of the borrower himself, but by the mistakes and problems of his suppliers, buyers and other external reasons. Therefore, bank lending operations are always associated with the risk of non-repayment of the loan. To reduce this risk, the bank evaluates the creditworthiness of the future borrower based on its actual past financial situation, while trying to identify unfavorable trends in advance and catch the emergence of the client’s future financial problems.

Due to the potentially dangerous consequences for a credit institution of excessively exceeding the level of credit risk, it is important to regularly carry out a comprehensive analysis of the processes of assessment, administration, monitoring, control, repayment of loans, advances, guarantees and other instruments. Therefore, the main content of the total credit risk management process should include assessment and analysis policies and practices of the credit institution and its adoption of the necessary measures in the following areas: managing the total risk of the loan portfolio; management of the organization of the credit process and operations; management of non-performing loan portfolio; assessment of credit risk management policies; assessment of policies to limit credit risks and limits; assessment of classification and reclassification of assets; assessment of the policy for reserving possible losses due to credit risks.

Today, an important task for banks is to improve the practice of managing credit risks, which continue to grow. According to Expert RA, according to the Bank of Russia, a traditional indicator of the level of credit risk, the share of overdue debt in the loan portfolio for individuals is increasing.

A peculiarity of approaches to assessing the probability of default based on analysis of financial statements is that the information in the borrower’s statements (subject to its reliability) reflects only the current financial position of the company and thus the assessment of credit risks is carried out after the fact.

We will conduct a summary assessment of the financial condition of a potential borrowing company to assess the creditworthiness of the enterprise according to the bank’s methodology.

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 higher the credit risk, the higher, as a rule, the interest rate paid on the loan.

The main source of information when assessing financial reporting data is the enterprise’s balance sheet, profit and loss statement, breakdown of accounts payable and receivable for each reporting date under consideration.

Table 9 − Dynamics of the main balance sheet indicators of Baltika OJSC, thousand rubles.

Title of articles				Growth rate, %
I. Non-current assets
Fixed assets
Construction in progress
Deferred tax assets
TOTAL for section I
II. Current assets
including raw materials, materials and other similar values
Future expenses
VAT on purchased assets
DZ (payments for which are expected more than 12 months after the reporting date)
including buyers and customers
DZ (payments for which are expected within 12 months after the reporting date)
Cash
TOTAL for section II
III. Capital and reserves
Authorized capital
Extra capital
Retained earnings (uncovered loss)
TOTAL for section III
V. Current liabilities
Accounts payable
including suppliers and contractors
debt to the organization's personnel
debt to state extra-budgetary funds
debt on taxes and fees
other creditors
Revenue of the future periods
TOTAL for Section V

According to Table 9, the following conclusions can be drawn:

The balance sheet currency increases every year - this is a positive trend, since this may indicate an increase in its solvency.

An increase in the share of own funds helps to strengthen the financial stability of the organization. At the same time, the presence of retained earnings can be considered as a source of replenishment of working capital and reduction of the level of short-term accounts payable.

Table 10 − Analysis of the main financial indicators of Baltika OJSC

				Absolute change
Indicator name					2013 to 2012
Current ratio (coverage ratio)
Quick liquidity ratio
Quick ratio
Financial Independence Ratio
Absolute liquidity ratio
Debt to equity ratio
Profitability ratio
Profitability ratio

From the data presented in Table 10, we see that all indicators are in the zone of optimal value, and the enterprise’s own funds far exceed the share of borrowed funds. Based on the calculations carried out, it is possible to draw up a table for determining the risk group of the borrower of Baltika OJSC.

Table 11 - Determination of the risk group of the borrower of Baltika OJSC.

Table 12 - Altman Model

Coefficient		Meaning	Factor	Work (gr.3* gr.4)
	The ratio of own working capital to the value of total assets
	Ratio of retained earnings to total assets
	The ratio of profit before tax and % received to the value of total assets
	Equity to debt ratio
	Ratio of sales revenue to total assets

Altman criterion = 4.4, which indicates a low probability of bankruptcy at the enterprise.

As can be seen from the analysis, Baltika OJSC is a creditworthy borrower, has a low level of risk in all respects and, accordingly, a positive decision on granting a loan can be made.

Thus, based on a regular analysis of the borrower’s ability to timely repay obligations to pay interest and principal, as well as the establishment of limits for one or a group of related borrowers and the receipt of sufficient collateral for loans provided by the main divisions of the Bank that make up the organizational structure of the risk management system, the formation of not only a high quality loan portfolio, but also its management.

3. Improvement of credit risk assessment in the bank Kuban Credit LLC

3.1 Optimization of credit risk assessment in a commercial bank

Like any other bank, Kuban Credit LLC is interested in making a profit, the main source of which is currently income from the provision of credit products. The likelihood that the borrower will not repay the loan to the bank, which in turn, given the massive nature of such phenomena, can lead to his bankruptcy.

Considering a bank's credit policy as an element of banking policy, it should be emphasized that the goals of credit policy are in organic connection with the general strategic and tactical goals of its banking policy.

Assessing the risk of lending is a task that employees of the credit department of Kuban Credit LLC constantly face. The main question is to determine who should be given a loan and who should not, while ensuring an acceptable level of credit risk.

Success largely depends on the extent to which factors affecting the stability of the borrower’s business are taken into account when making a decision to grant a loan. Despite the accumulated experience and knowledge of the Bank’s specialists, the effective use of the borrower’s qualitative characteristics in assessing and monitoring its activities poses a certain problem. Therefore, it seems necessary to develop measures and mechanisms that will improve the existing credit assessment system and also have a positive impact on the competitiveness of the Bank (Table 13).

Table 13 − Measures to improve credit risk assessment at Kuban Credit LLC

Events		Expected results
To assess credit risk, use the following methods in combination: analytical, Altman method and statistical		Will allow you to achieve more accurate results in assessing credit risk.
Creation of a unified electronic database of opinions on the financial position of the borrower and the professional judgments of the risk manager.		Centralization of disparate documents will provide access to structured and reliable information on all borrowers.
Use credit risk hedging using credit derivatives, forwards and options	Helps reduce bank credit risk
Use your own rating systems based on point scores, allowing you to classify clients by degree of reliability. Assess such quality indicators as: level of management organization; the state of the industry in the region, the competitiveness of the enterprise; the nature of the credit transaction; Experience working in a bank with a specific borrower	It will allow you to accumulate certain statistics to adjust lending methods, formulate more accurate conclusions about the creditworthiness of the borrowing company and the features of the loan product, and minimize credit risks
Review the ratio of the borrower's income to his monthly payments, and, if necessary, use refinancing and loan restructuring.	Reduction of low-quality “long-term” loans due to the possible insolvency of the borrower.
Using foreign experience in forecasting the financial condition of the borrower in the coming period	Allows you to make more informed decisions about granting loans
Use an express method for ranking business entities (Table 9) based on the coefficients of financial stability, asset turnover and liquidity, and return on capital.	Allows you to formulate more accurate conclusions about the creditworthiness of the borrowing company and the features of the loan product

From the analysis carried out in the second part of the thesis, we can conclude that the volume of loans provided to Kuban Credit LLC to both legal entities and individuals is increasing every year. But at the same time, the risk of credit activities of Kuban Credit LLC increases. Therefore, it is necessary to conduct a qualitative assessment of credit risks in the Bank. Credit risks in the Bank are often underestimated; low-liquid collateral is accepted as collateral or unsecured loans are provided even in cases where negative trends in the borrower’s business were already obvious.

The methods for assessing the borrower's creditworthiness proposed by Kuban Credit LLC are based primarily on quantitative indicators. But they cannot always fully characterize the borrower’s creditworthiness, since they can show his financial condition only at a certain point in time, i.e. They provide only a retrospective view.

The strategic goal of credit policy is to create conditions for the effective placement of borrowed funds to ensure stable growth of bank profits while maintaining liquidity limits and the acceptable total risk of banking activities. Tactical goals of credit policy may include, for example, expanding the range of services provided to private clients; improving work with high-income clients; cleaning the file cabinet; reduction in the share of problem loans, etc.

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. The elimination of all these problems at Kuban Credit must begin with optimizing the lending process, and then begin to improve the risk management system (Figure 7).

Minimizing credit risks

Figure 7 − Minimizing credit risks

Optimizing the lending process involves structuring the transaction based on the needs and capabilities of the borrower. It is necessary to understand for what specific purposes the loan is being requested and for what purposes there is a need to attract credit funds (this will help to avoid fraudulent transactions on the part of the borrower and neutralize the effect of hidden losses). For each project, the following must be justified: the reasons for the client’s need for loan resources; purpose of lending (for current activities, investment purposes, restructuring, etc.); amount, term and other aspects of the transaction (presence/absence of a repayment schedule, tranches, conditions for early termination, etc.).

In order to fully assess the client’s ability to properly service the loan, a qualitative analysis of the sources of repayment of the amount issued and the borrower’s actual debt load is needed. Cash flow must be structured in such a way that the borrower is able to make repayments without restructuring the loan product, refinancing from third parties and without serious damage to its current activities. To do this you need:

analyze the contract base in terms of: the carry-over balance for payment for services already provided/shipped products for the lending period; share of regular buyers/customers in the total volume of the customer base; share of framework agreements in the client’s total contractual base; the amount of transactions under contracts being signed.

forecast cash flows for: sufficiency (is there a profit to repay the loan, taking into account the borrower’s existing loans and borrowings); real income and expenses (is it possible that there is an unreasonable increase/decrease in revenue and expenses; are payments on the loan requested from the bank included in expenses); comparability with cash flows of previous periods; completeness of information (costs and income for all types of activities - operating, investment and financial) must be taken into account; sensitivity to risks and “margins of safety”;

analyze the loan portfolio regarding: the sufficiency of net cash flows/net profit to repay the loan in accordance with the established schedule and tranches of existing loans; compliance by the borrower with the terms of existing loan agreements; the presence of off-balance sheet obligations (guarantees, leasing, etc.).

We believe that a more objective assessment of the borrower’s creditworthiness can be obtained if we add the following to the existing quantitative and qualitative indicators presented in the second chapter:

level of management organization;

the state of the industry in the region, the competitiveness of the enterprise;

the nature of the transaction being financed;

experience of the bank working with a specific borrower.

In our opinion, credit assessment methods aimed at optimizing the level of credit risk should be aimed at solving three main tasks. The first is to study the composition and structure of assets and liabilities using ratios (liquidity, efficiency of asset use; financial leverage, profitability). The second is to analyze the cash flows and financial stability of the borrower. The third is to make an assessment based on business risk.

Evaluation of a loan application allows us to formulate conclusions about the creditworthiness of the borrowing enterprise and the features of the loan product. In practice, the assessment is most often based on the use of a comprehensive rating system; it is carried out in accordance with current methods for determining the credit risk group, i.e. by awarding points according to pre-established criteria.

We believe that the bank can use the following express method for ranking business entities based on financial stability ratios, asset turnover and liquidity, and return on capital. Compliance with the criteria of each of the analyzed financial ratios gives the corresponding rating value in points (Table 14).

Point value

1. Financial independence ratio

2. Leverage

3. Overall coverage ratio

4. Intermediate coverage ratio

5. Absolute liquidity ratio

6. Return on sales ratio

7. Profitability ratio of core activities

Share of accounts receivable in current assets:

Corrective point

Commercial bank "Kuban Credit" (hereinafter referred to as the Bank) is a medium-sized private regional bank in terms of assets, operating in the Krasnodar region since 1993 (General license No. 2518 of the Bank of Russia). The bank's main business is lending to corporate clients, some of which belong to the owner of the bank. The Bank has a well-developed network of additional offices in the region of its presence, currently the number of which reaches 65 additional, 3 operational offices and 1 branch, located in the Krasnodar Territory, Rostov Region, and the Republic of Adygea, allowing the Bank to cooperate with organizations of all forms of ownership, entrepreneurs and the population.

"Kuban Credit" today is a dynamic financial institution that is actively involved in the development of the country's economy and financial system. In addition to a wide network of additional offices, there are 88 cash desks, 50 foreign currency operating cash desks in the region, 59 points for issuing cash by bank cards and 62 24-hour ATMs.

The main goal of Kuban Credit LLC is to become a leading Russian bank, acting as the best financial partner for its client audience. To achieve this goal, the bank has everything necessary - competent management, qualified personnel, high standards of corporate governance, a developed network of sales points, a wide range of services, high-quality service, and a reputation as a stable and reliable financial institution.

Kuban Credit Bank is a member of the main professional banking and business communities: the bank is a member of the Association of Russian Banks (ARB), a member of the Association of Regional Banks "Russia", and a member of the Krasnodar Chamber of Commerce and Industry.

Kuban Credit Bank, actively developing, constantly introduces new computer technologies. The bank's information website and other online products have been created and are actively operating. Currently, Kuban Credit Bank provides a wide range of services to legal entities and individuals.

CB LLC "Kuban Credit" adheres to the Code of Ethical Principles of Banking, developed by the Association of Russian Banks, as an act of self-regulation of the banking community of the Russian Federation based on the norms of business ethics and financial law. CB LLC "Kuban Credit" voluntarily agrees to be guided in its practice by the specified Code, based on the long-term interests of the banking sector of the Russian economy and the requirements of civilized market relations.

The Bank's long-term strategy is based on a client-based business development model. The principles of customer focus and the desire to achieve excellent customer knowledge give bank managers the opportunity to effectively manage risks and create conditions for long-term, mutually beneficial partnerships.

Kuban Credit LLC is a universal bank that is actively developing both work with retail clients and services for the corporate sector.

Kuban Credit Bank has created significant organizational, intellectual, technical and financial potential. The bank has a stable position in the financial market of Kuban, has high liquidity of assets, dynamic growth of key indicators, and a stable customer base. Kuban Credit Bank is a member of the main professional banking and business communities: the bank is a member of the Association of Russian Banks (ARB), a member of the Association of Regional Banks "Russia", and a member of the Krasnodar Chamber of Commerce and Industry.

CB "Kuban Credit" LLC received certificate No. 269 dated 12/09/2004 on its inclusion in the register of banks participating in the compulsory deposit insurance system of the State Corporation "Deposit Insurance Agency".

CB "Kuban Credit" LLC adheres to the Code of Ethical Principles of Banking, developed by the Association of Russian Banks, as an act of self-regulation of the banking community of the Russian Federation based on the norms of business ethics and financial law. CB "Kuban Credit" LLC voluntarily agrees to be guided in its practice by this Code, based on the long-term interests of the banking sector of the Russian economy and the requirements of civilized market relations.

Since 2012, the partner of OJSC "SME Bank", Commercial Bank "Kuban Credit" limited liability company has been providing loans to small and medium-sized businesses, including through the targeted resources of the open joint-stock company "Russian Bank for Support of Small and Medium Enterprises".

A stable financial position and the presence of a high credit rating of "A-", the forecast "stable" (according to the Rus-Rating agency) allowed CB Kuban Credit to receive government support in the form of unsecured loans from the Bank of Russia. The Bank's achievements are recognized and highly appreciated by the country's banking community: CB "Kuban Credit" ? winner of awards at three Russian banking festivals.

The magazine "Expert South" No. 18? 19 (107? 108) dated May 10, 2010 published information about the awarding of the Chairman of the Supervisory Board of CB LLC "Kuban Credit" V.K. Budarin with the title “Best Banker of Russia” based on the results of 2009. Viktor Konstantinovich became the only representative of the banking community of the south of Russia among the laureates, and he received the high award for the second time. For the first time, the title “Best Banker of Russia” was awarded to Viktor Konstantinovich in 2007.

The basis of Kuban Credit's business is lending to the real sector of the economy, which accounts for over 60% of the bank's assets. At the same time, three quarters of the loan portfolio are loans provided to small and medium-sized businesses, as well as retail loans. Is the Bank taking part in the implementation of the national project “Affordable and comfortable housing for Russian citizens”, thereby helping to solve the most important social problem? formation of an affordable housing market in Kuban.

The reliable partners of Kuban Credit Bank include more than 30 enterprises in the construction industry, such as the plant CJSC OBD, LLC KrasnodarInvestStroy, LLC KrasnodarStroySnab, LLC OBD-Invest, LLC ISK Budmar, OJSC APSC Gulkevichsky ", OJSC "Silikat", CJSC "Kuban Marka", etc.

The Bank's mission is to meet the needs of each client for banking services of high quality and reliability, to preserve the funds of clients and depositors, and their investments in the real sector of the region's economy.

Strategic goals of the Bank:

Development and constant updating of the range of banking products in accordance with customer needs;

Increasing the technological effectiveness of doing business to ensure high quality services at optimal costs;

Development of a comprehensive service system in order to increase customer loyalty;

Maintaining trust on the part of clients and counterparties, including by increasing the openness and transparency of the Bank’s activities.

The main directions of the bank's future work are set out in the Development Strategy of CB LLC "Kuban Credit" for 2014? 2018 and are as follows:

Further expansion of business geography through the development of a regional network;

Increasing the capital base, allowing the Bank to expand its investments in the economy of the Krasnodar Territory and the capital of Kuban;

Increase in customer base;

Maintaining lending to corporate clients as a predominant area of ​​the Bank’s activities;

Improving the risk management system in conjunction with the overall development of the Bank's asset and liability management systems;

Implementation of a system of quality standards for organizing operational risk and liquidity risk management. Development of quality standards for credit, interest, and market risk management;

Modernization of the Bank's IT infrastructure, expansion of software functionality.

As part of improving the Bank's corporate governance system, functions have been formalized and clearly distributed among management bodies, rules and procedures have been defined to ensure compliance with the principles of professional ethics. The Bank has optimized its risk management system and established effective control over the activities of its divisions in order to protect the rights and legitimate interests of the Bank’s owners and clients. Timely disclosure of complete and reliable information about the Bank to interested parties was ensured.

CB LLC "Kuban Credit" has a four-tier structure of governing bodies (Figure 4), which includes: the General Meeting, the Supervisory Board, the Bank's Management Board and the sole executive body. Under the Chairman of the Bank's Management Board, collegial bodies have been formed: the Credit Commission, the Asset and Liability Management Committee, the Operational Risk Management Committee, and the Additional Offices Committee.

Figure 4? Structure of management bodies of CB LLC "Kuban Credit"

As a result, the general characteristics of the organization, its features, specifications of activities and services provided are considered. The organizational structure of management of CB "Kuban Credit" LLC has been studied and graphically displayed.