Credit risk analysis

Abstract

Credit risk is an essential factor that needs to be managed. Credit Risk Management needs to be a robust process that enables banks to proactively manage credit portfolios in order to minimize losses and earn an acceptable level of return for shareholders. ‘Credit Risk Management’ has become an important topic in banking and financial sectors. Risk is inherent in all aspects of a commercial operation; however, for Banks and financial institutions, credit risk is an essential factor that needs to be properly managed. In formulating a credit judgment and making quality Credit Decisions, the lending officer must be equipped with all information needed to evaluate a borrower’s character, management competence, capacity, ability to provide collaterals and external conditions which may affect his ability in meeting financial obligations. In this report I tried to review the existing credit risk management systems, credit risk grading and assessment methods etc. for the banks. Researcher has also made an effort to identify the problems and limitations of credit risk management systems as well as find out the causes of loan defalcation tendency of Bangladesh. Eventually, researcher chalks out a sort of findings and recommendation for improvement of credit risk management systems so that bank’s may attain common standards for credit risk management that’s why loan defalcation in banking sector may diminish.