In May 2008, Standard & Poor's Ratings Services announced its intention to include enterprise riskmanagement (ERM) assessments in ratings of nonfinancial companies (see "Standard & Poor’s To Apply Enterprise Risk Analysis To Corporate Ratings ," published May 7, 2008, on RatingsDirect). Since the third quarter of last year, our analysts have begun to incorporate specific ERM discussions into their regular meetings with the companies we rate, focusing on riskmanagement culture and strategic riskmanagement as two universally applicable aspects of ERM.
Our evaluation found that Ex-Im Bank has made significant progress in addressing the findings and recommendations previously noted in our report. Ex-Im Bank enhanced credit underwriting due- diligence requirements using a risk-based approach; improved default and performance reporting capabilities through technology improvements in Ex-Im Online and Ex-Im Reporting System; and established the Credit Review and Compliance Division, which serves in a valuable quality assurance and oversight role. Even in those instances where the Bank expressed disagreement with our original finding and recommendation, specific action was taken to strengthen the Bank’s MT Program processes and controls. Overall, four of eight recommendations remained open. Appendix A presents a summary of the audit recommendations reported in OIG-AR-09-04 and the status of each recommendation based on our evaluation.
If we go through the loan portfolio of Ethiopian commercial banks we will find the problem that this study wish’s to solve. As the annual report of National bank of Ethiopia shows most of the private banks loan is given to domestic trade and service and the public banks’ loan is given to manufacturing. For your awareness let’s take a good look on the annual report of Commercial bank of Ethiopia (CBE) & Awash international bank (AIB) on 2012/2013 or the annual report of National bank of Ethiopia on those years: National bank of Ethiopia reported the lended money in the country from is from the public bank, most (50.443%) of the lend money and advances is from CBE and from the private banks is from AIB (5.5%)(Annual report of NBE 2013/14). According to2merkato.com write by coting ‘The reporter newspaper (2014)’ all private banks in Ethiopia earned a combined total profit of 4.6 billion birr that AIB takes out of it 861 million birr of it and CBE earn 9.7 billion birr in the year of 2013/2014. CBE gives most of its loan for manufacturing sector but AIB gives its most loans for domestic trade and service. We all know that the manufacturing sector is more risk than domestic trade and service because of time lap and amount of money in simple scenario. So, it seems like the biggest private commercial bank is in avoiding of creditrisk and holding back to give loan for financing the manufacturing which is true even for the agriculture. A case study conducted by Felix Sabeza, Jaya Shukla, Gaurav Bajpai (2015) concluded that there is a direct relationship between creditriskmanagement and profitability of the banks. Objectives
A developed banking sector plays a vital role for financial stability of a country. In the MBA program, the internship is one of the vital parts, which has to be done by every student. The internship program provides an opportunity for the student to minimize the gap between theoretical and practical knowledge and will help in practical life. After completing my Masters of Business Administration (MBA) as a student I wanted to complete my Internship program from a reputed Bank which would be helpful for my future professional career. I got this great opportunity to perform my internship program in the STANDARD CHARTERED BANK LTD. I have completed internship program based on theoretical and practical knowledge. I was sent to Mirpur Branch. It was three months practical orientation program. This report is originated as the requirement of SCB.
PBL has a system of tracking Early Alert Account. An Early Alert Account is one that has risks or potential weaknesses of a material nature requiring monitoring, supervision, or close attention of the management. If such weaknesses are left uncorrected, they may result in deterioration of the repayment prospects for the asset or in the Bank's credit position at some future date with a likely prospect of being downgraded. Early identification, prompt reporting and proactive management of Early Alert Accounts are prime responsibilities of all Relationship Managers / Officers and the whole process is a continuous one. An Early Alert Report is completed by the RM and sent to the approving authority in CRM for any account that is showing signs of deterioration. The Risk Grade is changed and referred to CRM department for assistance in recovery.
If you are a regulator or do not work for a financial institution and select Option 1, attempt to gather the information from a bank you have examined, or from regulatory reports, e.g. examination reports, and the Uniform Bank Performance Report (UBPR). Alternatively, you might ask one of your fellow students to share information on his/her bank. To protect the confidentiality of the information, it is not necessary that regulators disclose the name of the bank.
To support my internship report I worked as an intern (at least ninety days) in Sonali Bank Ltd. Mirpur Shilpa Elaka branch and my topic of the report is "Creditriskmanagement practices in Sonali Bank Ltd." as part of the fulfilment of internship requirement. One of most significant challenges for a bank is to strongly manage its credits. Since the largest slice of income generated by a bank and a major percentage of its assets is subject to this credit, it is obvious that sensible management of this credit is fundamental to the sustainability of a bank.
The topic of my internship report is “CreditRiskManagement Practices in Mutual Trust Bank Limited”. The justification of my report writing on this topic is that creditriskmanagement has attained the latest highlighted feature in the banking field. The arena of creditrisk has gained extensive attention in recent years due to the increased competition and the challenges of the present financial crisis. The main objective of my report is to have a complete knowledge on the activities performed in CreditRiskManagement of Mutual Trust Bank Limited. In this report, I have put some specific objectives and methodology to reach the main objective. Specific objectives are to learn the most recent risk regulation for banks which is linked with creditriskmanagement, to understand various dimensions of risk involved in different credit transactions, to suggest scopes of improvement in creditriskmanagement of Mutual Trust Bank Limited. To get the answers of my objectives, I have considered creditrisk grading, risk area analysis under qualitative and quantitative approach for creditrisk assessment, credit approval process, administration and recovery process and also gone through several newspapers and MTB Annual Report 2014 for required information. This report contains some limitation because of information security concern and my interest to have coverage in General Banking, Clearing, Foreign Exchange and Credit Department within the 12- week internship period.
The banks by playing the role of an intermediary can mobilize the excess fund of surplus sectors to provide necessary finance to those sectors which are needed to promote for the sound development of the economy. As the banks provide finance or lending to its counter parts, there arises a risk of creditrisk, which is the possibility that a borrower or counter party will fail to meet its obligations in accordance with agreed terms. Even at present, this problem is haunting many banks and poses a major threat towards their sound performing. So it‟s very important to have an effective and sound creditriskmanagement system in place which will help the bank mitigate its risk factors and carry out successful financing service or lending. With that issue in mind, the topic „CreditRiskManagement of BRAC Bank Limited‟ has been undertaken as topic for my internship report.
Before enterprise-wide riskmanagement became the standard, most financial institutions took a fragmented approach to risk, managing each type of risk in a separate organization or department with little or no effort at integrating these areas. Many organizations still follow a traditional model. A chief credit officer, who reports to the President or the Board, sets credit policy and approves exposures. Similarly, the market riskmanagement function independently sets policies and measures and reports on market exposures and limits. Like the chief credit officer, the market risk executive is independent of the trading floor and might report to the CFO or the President.
• Loss due to currency devalua- tion (foreign currency risk). When compared with shorter holding and collecting periods, longer periods are subject to greater exposure to loss because of spoilage and price decline. Longer periods also produce greater costs, such as interest expense for carrying inven- tory and accounts receivable. There- fore, longer periods require higher profit margins to compensate for greater exposure to loss, higher costs, and lower rate of asset turnover.
The development of credit derivatives markets is taken into account when drawing up standards that better capture risk and recognising the most advanced techniques at the prudential level. The following conclusions were drawn from the presentation of the results of the survey conducted under the aegis of the ESCB Banking Supervision Committee: the liquidity of credit derivatives markets has increased sharply, and, contrary to expectations, the transfer of creditrisk to insurance companies has marked time. In Europe, activity thus appears to be principally concentrated in the banking sector. The most standardised instruments, such as credit default swaps (CDSs) account for the lion’s share of transactions. As yet, creditrisk transfer activities do not appear to have substantially impacted European banks’ provisioning needs over the last business cycle. However, a few aspects remain unclear. They relate to the amounts actually transferred and the complexity of some of the instruments used, such as the CDOs of CDOs (Collateralised Debt Obligations), which seem particularly obscure.
quality and creditmanagement personnel training and the control of professional ethics, set up the concept of dynamic management after credit, human resource strategic concept, and the benefit of post-loan management concept. At the same time improve the specialization level of management after loan and comprehensive quality is essential . (2) make post-loan management procedures and content specific. Post-loan management including after regulation, credit loan, account checking, loan risk classification, customer maintenance, there is a problem loan processing and loan recovery and summary evaluation, etc. (3) to do a good job of loan risk classification, we must strengthen post-loan management. To do a good job of loan risk classification, the corresponding resolve measures to prevent and overcome risks, because of information asymmetry between Banks and enterprises on the adverse impact of the creditmanagement, make the post-loan management standardized and institutionalized. (4) Institutionalize and intensify post-loan management work earnestly. Establish and improve a set of specific and detailed post-loan inspection measures for the administration of assessment . The customer check process, information analysis, early warning and forecasting process, such as customers withdrew from the process involved in the work the overall credit assessment category, for each assessment standards and the reference for management links and factors, prompted the post-loan management consciousness deeply post-loan management, perfecting the incentive mechanism.
This function includes risk assessments for business lines that are accounted for on an accrual basis – policy setting, structuring of the bank’s re-pricing and maturity schedules, undertaking financial hedge positions, capital budgeting, and internal profitability measurements. It also includes contingency planning where the bank analyses the impacts of unexpected changes in the environment (eg: interest rates, competitive conditions, economic growth) and how it responds to those changes.
The process of securitization is based on the distribution of bank loans by type (e.g. mortgages), and link them into a single unit and the process of making them marketable. This process is usually realized by selling this package to the institution which may be established by bank and do not subject to strict regulation by the baking regulator. Then the bank emit the bankable papers (securities) covered by the future repayment of loans and sell them to the financial investors, especially to other banks or insurance companies. By trading these securities, the bank obtain the cash and the process of securitization is closed. Illiquid assets (mainly loans) are transferred to the securities and liquid. Securitization is not limited to loans, but also to other bank debts, e.g. credit cards.
and Beaver and Engle (1996) identify a non discretionary component in loan loss provisions related to contemporaneous problem loans. Besides, Laeven and Majnoni (2003) and Bikker and Metzemakers (2005) show that provisioning behavior is related to the business cycle. These studies therefore highlight that the ratio of loan loss provisions to total loans exhibit a strong cyclicality. This is notably documented for France (Clerc et al., 2001), Austria (Arpa et al., 2001), Spain (Fernandez de Lis et al., 2001) and United Kingdom (Pain, 2003). Expected credit losses are therefore understated during upswings and overstated during downturns. A time-lag can notably be stressed between riskier loans which are granted during the peak of the business cycle (Keeton, 1999; Jiménez and Saurina, 2005) and loan loss provisions which are built up only during the next downturn according to backward-looking rules. This pattern is a major factor in driving the cyclical nature of recorded bank pro…ts and bank capital. In particular, Jordan et al. (2002) emphasize that the cyclicality of loan loss provisions is re‡ected in bank capital. As a result, provisioning rules in a backward-looking system can be seen as contributing to the overall cyclicality of the …nancial system and the macro-economy more generally (Borio et al., 2001).
luing the swaps. Hence the discount rates become larger with the creditrisk adjustment. While analyzing the whole system, we aggregate the ex- posures with their absolute values to eliminate any mitigation effect from the netting. Finally, the capital charge, which is calculated as EAD x Co- unterparty RW x 8% is calculated. RW is a func- tion of the credit quality of the counterparty, ex- pected recovery and effective maturity. Also, re- coveries with collaterals are not considered under our conservative approach, so we assume LGD as 100%. For each simulation we assumed different default probabilities, however, we report the ones only for 5 percent. For simplicity, we assume no transaction cost. As for now, wrong way risk and CVA are left for further study. Model validation is mostly done through comparing the resulted ex- posures to the banks’ capital and risk weighted as- set reporting based on SM. The CCR is reported in the credit RWA after being converted to credits with appropriate pre-set conversion factors. For the IRS, we take the said factor as 4%, whereas for the CS we use the factor 2%. In the analysis we assume the risk weights for the products as 100 %.
In the second half of 2011, following the escalation of the sovereign debt crisis in the Euro area and the contagion of tensions from the peripheral countries (Greece, Ireland and Portugal) to the core countries of the Euro area, foreign demand for Eurozone debt has suffered a major collapse involving the liquidation of outstanding positions in particular by institutional investors. The central element that led to this substantial change in terms of asset allocation was the perception that only a few Eurozone countries could be considered risk free; in addition, there was the growing fear of the Euro break-up which helped to stimulate the dynamics of cross-border capital outflow. During the period July - October 2011, foreign investors sold Eurozone fixed income instruments for around 88 bln Euro against a 320 bln Euro inflow in the first half of 2011. Japanese investors sold almost 98% of the Greek bonds and 61% of the Portuguese bonds; in the same period the sale of Italian bonds was almost 10.5%. Starting from the Lehman default event (September 2008), government bonds spreads have suffered a dramatic widening phase both in countries with a weak public sector finance and in countries considered to be safer. The volatility of the government bonds spread seems to reflect not only the perceived default risk of the issuers but also some other new relevant factors:
Banking provides the opportunity for the public to participate in the development by organizing fundraising through businesses run by banks, such as savings, deposits, current accounts and credit. The type of banks according to Law No.10 of 1998 includes two classifications namely Commercial Banks and Rural Credit Banks (BPR). BPR is a bank that carries out business activities on a regular basis or based on Sharia rules but simply do not include payment traffic services (Gischa, 2020). Credit activity is the process of forming bank assets so that credit is a bank asset that has risks because these assets are controlled by outsiders (debtors). Banks must be able to manage these assets so that the risk that lies in the assets can contribute to a large income for the bank not to the contrary occur, namely a large loss for the bank. Bank lending certainly has a risk, namely creditrisk. Creditrisk especially for banks, is that credit becomes bad in the sense that the bank is no longer, or irregular in receiving interest and installments on credit repayments, this, of course, will harm the bank because in addition to the bank not getting interest income, the bank also loses (Suhardi, 2006).
Data Mining is used for riskmanagement in banking industry .Cases like offering new customer credit card, extending limit of existing credit card , approving loans can be risky decisions for bank if they do not know anything about the customer. So it is necessary for bank executives to know their customers whether they are reliable or not .With the help of Data Mining, credit behavior of individual borrowers and credit card loans can be derived on basis of credit history, length of employment and residency. In this way a score can be produced on basis of which distinguish of customers as a ‘good’ or ‘bad’ customer can be done . This score can decide whether the person is good candidate for loan or if there is high risk of default. The customer who have been with bank for long time and in a good standing and also have high wages are more likely to receive a loan as compared to a new customer with no history in bank .The bank can be in a better position by knowing the default for a customer and can also reduce the risk .