 CREDIT RISKErika Spuchľáková and Juraj Cúg Economy & Business Journal, 2014, vol. 8, issue 1, 1006-1013 Abstract: Credit risk or default risk involves inability or unwillingness of a customer or counterparty to meet commitments in relation to lending, trading, hedging, settlement and other financial transactions. The Credit Risk is generally made up of transaction risk or default risk and portfolio risk. The portfolio risk in turn comprises intrinsic and concentration risk. The credit risk of a bank’s portfolio depends on both external and internal factors. The external factors are the state of the economy, wide swings in commodity/equity prices, foreign exchange rates and interest rates, trade restrictions, economic sanctions, Government policies, etc. The internal factors are deficiencies in loan policies/administration, absence of prudential credit concentration limits, inadequately defined lending limits for Loan Officers/Credit Committees, deficiencies in appraisal of borrowers’ financial position, excessive dependence on collaterals and inadequate risk pricing, absence of loan review mechanism and post sanction surveillance, etc. This paper points out the measurement, hedging and monitoring of the credit risk. Keywords: credit risk; credit risk measurement; credit risk hedging and credit risk monitoring (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:isp:journl:v:8:y:2014:i:1:p:1006-1013 Access Statistics for this article More articles in Economy & Business Journal from International Scientific Publications, Bulgaria |
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