Credit risk management in commercial banks

Authors

  • Besarion Nakopia Tbilisi Humanitarian University

DOI:

https://doi.org/10.52340/bal/2024.02.06

Abstract

It is important to employ contemporary system and main procedures of credit risk management at the commercial banks, as well to carry out risk control during the lending activities and analysis of typical problems the solution of which is of necessity with the view of implementation of the cotemporary systems of credit risk management.

         The lending transactions constitute the basis of the banking business activities inasmuch as they are the main source of income for a commercial bank in particular. However these transactions are associated with certain credit risks more or less influencing every bank during the lending process. The main objective of a bank is to find the golden mean i. e. to reach an optimum ratio between the lending transaction yield and the risk quality, which is feasible to accomplish via risk reasonable management.

      The main controls of the credit risk management are as follows: credit portfolio diversification, analysis of creditworthiness and financial standing of borrowers, lending personnel qualification, credit structuring, credit rationing, creation of reserves for paying off probable losses from loans, etc. Assessment of creditworthiness of the customers is the most widely used method of decreasing the credit risks in the banking practice.

     Practical research of the credit transactions of the commercial banks of market-economy countries and generalization of their national experiences makes possible to consider suitable credit risk assessment methodology that includes all the stages of the lending process. Studying the reasons of occurrence of a credit risk showed that those of personal and administrational nature gain more importance in such same occurrence.

   In the current context, strengthening of control to the banking sector by appropriate supervision agencies becomes more important with the view of improvement of credit risk management at the banks. A sound employment of suitable facilities of inspection of the commercial banks on site is of special significance. In terms of high economic risks the winner is who would be able to precisely forecast, asses and timely minimize the risks.

Author Biography

Besarion Nakopia, Tbilisi Humanitarian University

Doctor of Economic Sciences, Professor

References

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Published

2024-12-27

How to Cite

Nakopia ბ. . (2024). Credit risk management in commercial banks. Business and Legislation, 17(2), 42–47. https://doi.org/10.52340/bal/2024.02.06