Circumstances led to the situation in which the giant loss incurring banks due to subprime crisis have to solely depend on capital flow from Middle East, Chinese and investors from Singapore. Thus major nucleus of these losses has been related to credit risk. Thus the notion of the credit risk management is a grave concern in this world of complex financial milieu and it has become highly essential for the financial institutions to suppress loses arising from credit for sustained long run performance. The obnoxious cases of bank failures, acquisitions, consolidation have steered the focus of management of the financial institutions in restructuring operations, improving asset quality and building loan portfolios with credit risk management as the base structure (Yo & Yusoff, 2009, p.46). Influence of credit risk management on the banks Credit risk management has an overwhelming concern on the financial institutions especially that of a bank. The credit risks in simple language can be defined as the potential which the bank borrower or the counterparty will fail to meet its obligations with various agreed terms. The basic objectives of the credit risk management are directed towards the maximization of the risk adjustment of the bank with the maintenance of the credit risk exposure within the domain of various accepted parameters (which may vary from time to time). The banks basically require managing the credit risk intrinsic in the entire portfolio as well as the risks in the individual credits or the transactions. The banks should be also taking into account the relationships between the credit risk as well as that of the other risks. The effective management of the credit risk can be argued as a crucial component of a comprehensive approach towards risk management and are highly essential to the long-term success of any of the banking organization (Principles for the Management of Credit Risk, 2012, p.1). In the recent decades leading to financial crisis, the banks have operating in an enhanced competitive market and as an involuntary mechanism being forced in taking more risks for seeking out higher margin actions. Securitization, commercial papers have created the platform where the banks can generate higher margin business by the process of converting the illiquid loans into marketable securities and thus lead to the release of capital for other investment opportunities. Empirical testing reveals that the process of securitization leads to the expansion of credit leading the banks to hold riskier assets (Casu et al, 2010, p.3). From the perspective of the Basel Accord II , securitization exposures the banks have to abide by some norms like that of proper documentation of the objectives, summary of the bank’s policies for securitization and whether there is limitations in the application of sophisticated credit risk management with the securitization method. The credit risk management can be successfully implemented if the banks adapt refined techniques for minimizing the risk of the expected losses (Securitization of Credit Exposures: Important Tool of Credit Risk Management under Basel Accord II, 2006, p.598). Technology enhancing the process of credit risk management One of the most important parts in the credit risk management is that of quantifying the risks and it is a very crucial part in the risk management process. From
A Critical study of credit risk management in the First Bank of Nigeria Plc Literature Review: Majority of the financial institutions (primarily the banks) are often exposed to significant losses from outright default as a consequence of the customers failing in meeting obligations related to trading, lending, settlement, other financial transactions and so on…
This study identifies the main causes of credit risk for Techcombank before and after the implementation of the new risk management regime. Results of this research will form an important basis in understanding the concept of credit risk, how it occurs in the banking institutions and how it can be prevented.
Credit risk management contains some key principles that are: a clear structure should be established, accountability and responsibility should be allocated, prioritize the processes, clear communication of assigned responsibilities and answerability assigned thereto.Credit risk management has an overwhelming concern on a bank.
A Critical study of credit risk management in the First bank of Nigeria Plc Chapter 4 4.1 Credit policy in first bank of Nigeria Credit risk management in First Bank of Nigeria verifies and manages all credit process beginning with origination to the collection of payments and other obligations (Risk management disclosure, 2010).
Table of Contents
CHAPTER ONE 4
1. Introduction 4
1.1 Background of the Study 5
1.2 Problem Statement 6
1.3 Aim and Objective of the Study 6
1.4 Significance of the Study 7
1.5 Scope and Limitation of the Study 8
1.6 Definition of Terms 9
CHAPTER TWO 10
Although all firms face some market risk, it is possible to mitigate other risks including social and reputation risks by emphasising implementation of CSR initiatives. In the present day and age, global corporations are the subject of scrutiny for their policies and practices across the world.
Date: Contents Serial no. Topic Page no. Executive Summary 3 1 Aims 4 1.1 Objectives 4 2 Literature Review 5 2.1 Introduction 5 2.2 Risk Management- An Overview 7 2.2.1 How is Risk Management Defined? 7 2.2.2 Where is Risk Management applied? 8 2.3 Risk Management Process 10 2.3.1 An Overview 10 2.3.2 The Process 11 2.3.3 Techniques and Tools used in Risk Management 15 2.4 Motives for Formal Risk Management Process 19 2.5 Risk Management Process Advantages 21 2.6 Risk Management Process Limitations 23 3 Analysis and Discussions 24 4 Conclusion 37 5 Recommendations 41 Reference 44 Bibliography 46 Appendices 49 Executive Summary Risk is inherent in everyday life.
This report deals with the importance of strategic management in every business organization and how business strategies determine the performances of an organization. Managers in any organization need strategies to solve the complicated problems that they have to cope with.
A Critical study of credit risk management in the First Bank of Nigeria Plc Credit risk management Any kind of probable loss is a risk and needs to be computed. The volume of such losses depends on the risk management concept and its technicalities. In banks, the most important risk issue is the credit risk issue.
52 pages (13000 words)Dissertation
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