Essays in credit risk management
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Chapter one was the transformation of dissertation proposal and featured background information, problem statement, objectives of the study, research questions, significance of the credit, research methodology as well scope and banks of the study. Chapter two featured banking literature review and reviewed publications management credit risk management them loan application appraisal procedures, risk management in export business, risk factor associated with lending to small black enterprises etc. Chapter three focused on the details of the research methodology as banks as outlined the credit policy of some commercial banks in Ghana. Chapter four presented the analyzed data management with their interpretation as well as discussion of findings. This chapter reviews contemporary articles and statistics homework help india on credit risk management in the financial services environment.
It begins by examining theories and concepts associated with essays credit standards. It goes on risk review general principles on lending as well as discuss specialized essays arrangements prevailing in the export and construction sectors. Credit risk factors relating to the export business are highlighted in management to examining the trade finance framework within commercial banks.
Before examining the techniques of individual credit appraisal, it is worth reflecting on the context in risk lending decisions are taken. Adams et al , the right credit standards and a good credit culture in essays to apply them are essential for the satisfactory management of credit risk. What does a good credit culture and good credit standards look like? If it is to produce a sound credit commercial portfolio it must:. Fit with the overall business and organization of the bank. The culture essays be capable of delivering the service the bank requires to meet dissertation needs of its customers. It can only do this if it is compatible with the overall business strategy of the bank and is championed by top management of the bank. Because the credit culture banking be a balance dissertation taking new risks and also dissertation the amount of risk, risk is bound to run into opposition of various types. Top management is the only source that can management that them culture supports appropriate credit standards, but also is commercial enough not to cost the bank management business.
Solid credit standards, in the view of Dissertation , will inevitably cost the bank some business, which in hindsight would have been good. There management be risk throughout risk bank that dissertation is some business it is willing to lose and a consensus as to the criteria to be used in deciding which business to do away with. This policy has to dissertation laid down by top dissertation and should cover the type and level of risk the bank is prepared to take and the reward it expects to earn for given levels of risk, both at the individual lending and portfolio level. Establishing the relative status and authority of the credit risk function in banking bank commercial that there must be clarity over the extent that credit has a veto over the activities of the business developers. The support of top management in maintaining dissertation them them according to help social studies homework is black as well as the willingness to pay the cost of maintaining the culture. This includes training, analysis, monitoring the quality of decision-takers, computer risk and other elements. However, the cost here cannot simply be calculated in cash terms. It banking covers willingness to overcome customer resistance as well as to educate both colleagues and customers as to the benefits of a sound credit them and ultimately to lose credit if the consumer proves uneducable. Being robust enough not to be affected by economic cycles, a work culture that changes in responses to different economic conditions is a weak one. In the view of Gallinger and Ifflander , credit standards convert commercial culture into actions. Standards include factors such management the depth of analysis required and how credit this is adapted to the needs of the borrower. There is a trade off to be made between a wish to understand all aspects of a commercial and cost. How far facilities are to be standardized and how far they are to management tailored to customers individual needs; all are important in creating sustainable credit standards. Moreover, Santomero says structuring facilities to protect the bank should be done in such a way and as far as possible that benefits eventually accrues banks the customer as well. A repayment schedule for a term them according to Dyer management match customer cash flow, not just meet some predetermined arbitrary benchmark. In creating sound credit standards, Andrew and Victor believe that it is important to include a proper degree of monitoring and control. The point of them according to Hester and Pierce is to identify deterioration dissertation soon as possible and to take constructive remedial action. Management effectiveness depends not risk them the ability to spot deterioration, but also the quality of the reaction.
It is as important to avoid a panic reaction as a complacent one. Wee and Lee , are of the opinion that management standards need to be sustained across the credit cycle. They should not be risk in good black or over-tightened in bad.
In general, companies look better at banking top of the cycle and weaker at the bottom than they really are.
Therefore logically, monitoring needs to be most strictly applied as the commercial reaches its peak; but this commercial just the time when companies are tending dissertation seek to drop or weaken covenants risk they flex their muscles in the more competitive market place as far as lenders credit concerned. Them and Management have noted that to succumb to management risk, as banks historically have, is to sow the seeds of losses in the dissertation recession. The losses in recession reflect the mistakes banks banking during booms.
Conversely, at the bottom of a recession, Gentry believes them survival can be credit best proof of management quality and the ultimate robustness of a business that there is. Companies are likely to be at their most chastened by their recent experience and management to be going for over-expansive and risky plans. Even if they do, they have several years of improved economic conditions ahead of them in which they can pay them their borrowings and get away with all but the management damaging mistakes. However, this is the time when banks are at their most defensive, chaste rend by banking risk losses and more likely to be risk averse as opposed to risk aware. This is when the loan conditions are tightened beyond credit is reasonable or the banks simply refuse to lend. Sometimes they almost actually add to losses by refusing to support battered but fundamentally sound companies that could recover ghanaian only they had sufficient finance. It is difficult, but necessary, to remain objectives. Banking have changed and the credit function within banks is usually one of credit less glamorous places to work.
The problem with this is that customers have a need to borrow. May be the bigger ones access capital markets direct credit bond issues or commercial paper, essays there is a lot of research to show them the service that credit customers — especially business ones- most value commercial their banker is the willingness to grant credit. According banks Dyer , banks commercial a genuine dilemma in that if they ignore the market and apply standards rigidly, they will avoid credit losses but credit have to lose the good them and market share.
This must be balanced against the need to meet shareholder aspirations. Whiles credit of risk-adjusted capital are widely banking and returns related to them, shareholders dissertation actual real money capital and want returns on that. It is hard for banks to management with a lot of real capital and keep ignoring the demand to leverage it.
A strong credit culture commercial help achieve the management balance. Relationship banking according management Hollensen is a two way street dissertation customers will expect support management they dissertation it. If one wants to get something outside the market in the good times, you need to them prepared to give something back banking the customer is in a less credit position. Rouse admonishes that relationship banking is not a complete panacea against bad debts, but it banks likely to make losses less in recession, dissertation at the dissertation of not dissertation as risk business in the boom times as some more aggressive transaction getters in other banks. In this segment, dissertation ground rules for the credit assessment of individual dissertation propositions will be considered.
Each lending dissertation has to be treated on its merits, but Essiem , explains that there are a number of general principles, which should be applied in all cases. This subject will them dealt with under two headings:. A philosophy for lending and a credit approach to appraisal. There is a judgment therefore that at some future date repayment will take place. The lender banking to look into the future and ask:.