Academic literature on the topic 'Borrower creditworthiness'
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Journal articles on the topic "Borrower creditworthiness"
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Kucherenko, Svitlana, and Oleh Kucherenko. "Methods of assessing the creditworthiness of the natural person borrower." University Economic Bulletin, no. 46 (September 1, 2020): 170–77. http://dx.doi.org/10.31470/2306-546x-2020-46-170-177.
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The purpose of the study is to analyze the methods of assessing the creditworthiness of the natural person borrower in terms of feasibility of its applying in various types of lending, as well as to provide the recommendations on the most effective method of implementing such an assessment in banking institutions practice. Both general scientific and special methods of scientific knowledge have become the methodological basis of the article. In the process of writing the article the following methods were used: dialectical, economic comparisons and generalizations, grouping, graphical, system-structural analysis and synthesis. Results of work. In the article the modern methods of assessing the creditworthiness of the natural person borrower used by banking institutions in their practice are thoroughly investigated. The advantages and disadvantages of using each of them and the feasibility of applying different methods in providing various types of loans are substantiated. It is determined that the most promising method of assessing the creditworthiness of the natural person borrower is credit scoring. The implementation of these recommendations will lead to the improvement and acceleration in providing the quality banking services for the client, as well as to the successful operation of the banking institution. Conclusions. The financial condition of the bank as a whole depends on the quality of assessing the creditworthiness of borrowers. Most often, the examination of the creditworthiness of individual borrowers is carried out on a point system for assessing the clients’ reliability. Based on the analysis of qualitative and quantitative indicators, the bank makes a conclusion about the reliability of a potential borrower and gives the assessment to the creditworthiness of the borrower. In considering the financial situation and economic condition of a potential borrower all the details are important, otherwise the bank may be at risk and suffer great losses. At the same time, the complexity of assessing the creditworthiness of the borrower makes financial institutions to apply the different approaches to evaluation methods. Careful clients’ selection based on the assessment of the borrower's creditworthiness allows the bank to minimize its credit resources loss.
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Масленников, Анатолий, and Anatoliy Maslennikov. "ANALYSIS AND ASSESSMENT OF THE CREDITWORTHINESS OF BORROWER." Services in Russia and abroad 10, no. 5 (August 29, 2016): 58–68. http://dx.doi.org/10.12737/21196.
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In modern conditions commercial banks and enterprises inadequate use the credit opportunities for innovative projects investment to ensure the continuity and acceleration of the reproduction process and timeliness of settlements with suppliers and creditors. Banks need to significantly change the approach to the analysis and assessment of the creditworthiness of borrower and methods for their implementation.
This article clarifies the concept of "creditworthiness", defines list of tasks to be solved in the process of analysis and assessment of borrower’s status.
The information provided by a borrower to the bank, the information that is available directly at the bank, and external information is used as the source data for the analysis of the creditworthiness of borrower.
Source data is used to assess the creditworthiness of borrower from legal and economic points of view. From a legal point of view it is necessary to explore and assess the legal capability of a potential borrower (the organization) to make a credit transaction.
From an economic point of view, to assess the creditworthiness of borrower the factors and conditions should be identified, in which he will not be able in full and in due time to pay his credit debt.
The purpose of assessment of the creditworthiness of borrower from legal and financial points of view is in aspiration of a bank to reduce risks of non-return loan.
For this analysis, a bank needs for information describing the financial status of borrower, which makes it necessary to study the financial and accounting reports of the organization, information about cash movement on the borrower’s bank accounts, information about the borrower’s potential previous cooperation with other banks and insurance companies.
The article discusses the various options for methods of solving this problem by the banks, investigates modern trends of borrower’s creditworthiness assessment, and proposes method of calculating the borrower’s rating on the basis of the expert method and the method of paired comparisons.
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Alexander Petruk, Olena Lagovska, Nataliya Vyhovska, and Volodymyr Vyhovskyi. "DEVELOPMENT OF METHODOLOGICAL PRINCIPLES FOR CREDITWORTHINESS ASSESSMENT AS A BASIS FOR CREDIT RISK IDENTIFICATION OF THE BANK." European Cooperation 9, no. 40 (October 31, 2018): 29–39. http://dx.doi.org/10.32070/ec.v9i40.25.
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The work deals with the methodological principles for creditworthiness assessment of the borrower, which serves as the basis for determining the bank credit risks and directions for improving the regulation. The authors took into account the off-balance sheet liabilities in order to improve the methodology of assessing the borrower's creditworthiness, which allowed to increase the accuracy of the bank's credit risk assessment and is the basis for effective management decisions on the credit approval. As a result of the analysis of methodological support for assessing the borrower's creditworthiness, the authors have proven the effect on the integral index and debtor class. These studies confirmed that their legal regulation is a prerequisite for the effective implementation of a new methodological approach to the creditworthiness assessment in banking institutions. The article defines three regulatory levels of the creditworthiness assessment of the borrower-legal entity (international, national and interbank) and directions for improving regulation at the national level, as well as at the domestic one.
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Orlova, Ekaterina V. "Methodology and Models for Individuals’ Creditworthiness Management Using Digital Footprint Data and Machine Learning Methods." Mathematics 9, no. 15 (August 1, 2021): 1820. http://dx.doi.org/10.3390/math9151820.
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This research deals with the challenge of reducing banks’ credit risks associated with the insolvency of borrowing individuals. To solve this challenge, we propose a new approach, methodology and models for assessing individual creditworthiness, with additional data about borrowers’ digital footprints to implement comprehensive analysis and prediction of a borrower’s credit profile. We suggest a model for borrowers’ clustering based on the method of hierarchical clustering and the k-means method, which groups actual borrowers having similar creditworthiness and similar credit risks into homogeneous clusters. We also design the model for borrowers’ classification based on the stochastic gradient boosting (SGB) method, which reliably determines the cluster number and therefore the risk level for a new borrower. The developed models are the basis for decision making regarding the decision about lending value, interest rates and lending terms for each risk-homogeneous borrower’s group. The modified version of the methodology for assessing individual creditworthiness is presented, which is to reduce the credit risks and to increase the stability and profitability of financial organizations.
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SHEPTUKHA, Olena, and Anna LAPTIEVA. "Assessment of the borrower's credit capacity using discriminative analysis." Economics. Finances. Law, no. 6 (June 26, 2020): 25–28. http://dx.doi.org/10.37634/efp.2020.6.6.
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Introduction. At the present stage of economic development in the organization of credit relations uses a significant number of approaches and methods to determine the creditworthiness of the borrower. Today, banking institutions are developing different approaches to the analysis of the borrower's creditworthiness. Moreover, each bank determines its own method of assessing the financial condition of a potential borrower, taking into account the specific terms of the contract. Assessment of creditworthiness of the enterprise by the method of discriminant analysis is carried out by calculating and interpreting the integrated indicator of financial condition. The purpose of the paper is to determine the nature and assessment of the borrower's creditworthiness using the methods of discriminant analysis. Results. Assessing the borrower's creditworthiness is a topical issue that affects the success and effectiveness of its lending activities. That is why the article is devoted to defining the nature and assessment of the borrower's creditworthiness using the methods of discriminant analysis. It assessed the creditworthiness of PJSC "Kharkiv Biscuit Factory" using foreign and domestic methods of assessing the creditworthiness of the borrower. It was determined that the main disadvantage of foreign models is that they are developed based on a study of enterprises in the United States and Western Europe. Weights are not adapted to modern conditions of transformation of the domestic economy and do not take into account the specifics of Ukrainian enterprises. These models have several significant limitations. They can be used only as additional models in parallel with modern domestic models. Calculating the probability of bankruptcy of PJSC "Kharkiv Biscuit Factory" according to foreign and domestic methods can give a clear conclusion about the financial condition of the enterprise. The above-mentioned methods demonstrate the absence of probability of bankruptcy at PJSC "Kharkiv Biscuit Factory". Conclusion. In general, the degree of reliability of the assessment of economic security of the enterprise and a set of necessary measures to prevent possible threats depend on the accurate identification of threats, the correct choice of a system of indicators for diagnosis. According to the results of calculations, it was determined that the company belongs to class A, which is characterized by high financial condition.
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Khomenko, Inna, Iryna Sadchykova, and Yuliia Krasnianska. "Current approaches to the analysis of the borrowers’ creditworthiness: Ukrainian and World experience." Economics ecology socium 3, no. 1 (March 31, 2019): 48–55. http://dx.doi.org/10.31520/2616-7107/2019.3.1-5.
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Introduction. Non-repayment of loans by borrowers not only jeopardizes the profitability of banking structures, but also the ability to calculate them under liabilities - deposit and borrowed funds. This situation is dangerous for the entire banking sector of the country, as it raises a number of acute problems: imbalance of loan and deposit portfolio by volumes and terms; distrust of the population to commercial banks, financial destabilization in the state as a whole, and others like that.
Aim and tasks. The main purpose of this work is to study modern domestic and foreign approaches to assessing the creditworthiness of borrowers.
Results. Based on the analysis of the definitions it is expedient to use the following interpretation of the term "creditworthiness": the financial, economic and legal capacity of the borrower to obtain a loan and return it to the commercial bank in accordance with the terms and conditions of the agreement. At the initial stages of the methodologies developing for the analysis of borrowers' lending, the leading role was played by the coefficient method, which by its nature is considered the simplest and is currently used as an express evaluation and preceded by other research. Currently, almost all commercial banks use a rating approach to assess the borrower's creditworthiness. Such methods also include calculation of coefficients, but contain a predictive component. The rating approach is valuable, because it requires a constant collection of updated information. Often, banks when building credit ratings use the methods of the relevant agencies. It is now believed that the formation of credit ratings allows you to get the most general idea of the borrower's creditworthiness (at the level of the commercial bank) and about the quality of the loan portfolio (at the level of the banking system of the state). Moreover, when assessing the creditworthiness of borrowers – individuals, the rating approach is most often used.
Conclusions. The conducted studies indicate that improving approaches to assessing the creditworthiness of borrowers by commercial banks is particularly relevant for Ukraine. It is important to carry out measures (including administrative) in order to increase the reliability of the input information of borrowers, training of specialized specialists – experts, assessment of qualitative data on the debtor, formation of constantly updated statistical databases, adjustment of methodological developments taking into consideration the variability of the economic situation in Ukraine, ensuring transparency of the analysis, etc.
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Zaruk, Natalia Fedorovna, and Elena Sergeevna Kolomeeva. "Analysis of the creditworthiness of agribusiness organizations as a tool for obtaining additional Bank financing." Buhuchet v sel'skom hozjajstve (Accounting in Agriculture), no. 9 (September 1, 2020): 39–48. http://dx.doi.org/10.33920/sel-11-2009-05.
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The article presents various approaches and methods for assessing the creditworthiness of agricultural organizations in order to obtain additional funding. Models of analysis of the borrower’s creditworthiness by foreign banks and some Russian credit institutions are considered. A comparative assessment of the main methods for determining the level of creditworthiness of a borrower — legal entity is given based on: statistical models (methods) of assessment; models of limited expert assessment; models of direct expert assessment. It is established that major Russian banks mainly use methods for analyzing the borrower’s creditworthiness, based on the analysis of the main performance indicators of the industry and organization, assessment of the borrower’s financial condition, and analysis of collateral. These rules allow agribusiness organizations to assess their ability to repay debt and interest on it on time and reduce Bank risks. The analysis of the creditworthiness of the agribusiness organization according to the methodology of JSC “Rosselkhozbank” was carried out.
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Дмитриева and Olga Dmitrieva. "Short credits and micro-loans for individuals: advantages, disadvantages, the main options." Vestnik of Kazan State Agrarian University 9, no. 3 (December 14, 2014): 11–15. http://dx.doi.org/10.12737/6505.
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In everyday life, unforeseen or unplanned purchases lead to a desire to borrow a small amount on the short term. This problem is known to many people. Currently, the only viable option is short-term loans from commercial banks or micro-loans provided by microfinance institutions. They have their own advantages and disadvantages, and it is designed for a specific audience of potential borrowers. Short-term bank credit is available at any bank that deals with consumer credit borrowers. There are four main types of loans in the short term: a term loan; line of credit; overdraft on a personal map; quick loans. The potential borrower has the ability to get a loan only if certain conditions of the credit institution. Microfinance institutions are engaged in issuing microloans. There are two main types of micro-loans to individuals: consumer loans for a period of one year; term loans to payday. In this type of lending the solvency of the borrower is not evaluated, not studied his income, credit history is not analyzed. The creditworthiness of the borrower is assessed through informal criteria. Despite some limitations and high cost, short-term loans and micro-loans is a great opportunity to purchase desired and necessary goods or solve other consumer problems.
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KRAMARENKO, Iryna, and Liliia KOZACHENKO. "METHODOLOGY FOR ASSESSING THE BORROWER’S CREDITWORTHINESS: PRACTICAL ASPECT." Economy of Ukraine 2018, no. 5 (May 10, 2018): 49–60. http://dx.doi.org/10.15407/economyukr.2018.05.049.
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Today, the banking system does not fulfill its main task, since it does not finance or lend to the real sector of the economy, and a quarter of the loans provided are written off and unpaid. The current situation in Ukraine necessitates studying the ways and means to improve the assessment of the borrower’s creditworthiness as the main direction for stabilizing and improving the efficient lending activity of com-mercial bank. The purpose of the study is: (i) to access the current state of bank lending to business; (ii) to access the borrower’s creditworthiness and its influence on the amount of overdue loans; (iii) to determine provision for impairment of loans; (iv) to provide practical recommendations for improving the borrower’s creditworthiness on the example of JSC Raiffeisen Bank Aval. The annual amount of loans granted by the banking system to enterprises in-creases, while the indebtedness of the customers also grows. Thus, the share of overdue loans in August 2017 amounted to 22.65% of the total loans granted in Ukraine. The JSC Raiffeisen Bank Aval is among the leaders in providing loans. During the period under study, interest income of the bank decreased significantly, this indicates a low profitability of credit operations. When analyzing the provisions for impairment, it was revealed that more than 28% of loans are written-off, and this is primarily due to a wrong assessment of the borrower’s solvency. When assessing the financial condition of the borrower, according to the meth-odology of JSC Raiffeisen Bank Aval, it is determined that performance indicators of the potential payer of loans are not taken into account. Also, the methodology has no rating or scoring of accounting ratios used in the analysis of solvency of the bor-rower. The rationale is to use, when assessing the solvency of the borrower of JSC Raiffeisen Bank Aval, the Decree “About the statement of Regulations about deter-mination of Ukrainian banks credit exposure in active banking operations”, which came into force on January 3, 2017.
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Song, Xiao, Hao Ying, Xiande Zhao, and Lujie Chen. "Improving assessment capability for accounts receivable pool financiers." Industrial Management & Data Systems 120, no. 3 (December 31, 2019): 547–66. http://dx.doi.org/10.1108/imds-04-2019-0239.
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Purpose The accounts receivable pool (ARP) is an e-invoice management system that provides suppliers with easy access to financial service. The purpose of this paper is to focus on the strength and weakness of ARP mechanism and suggest efficient methods to identify creditworthy borrowers. Design/methodology/approach By decomposing the sales records of 348 ARP borrowers and predicting the occurrence of overdue incidences, this study first portrays the creditworthy borrowers by sales features. Then, content analysis was applied to measure the loadings of soft and hard information, and examined the effectiveness of different information structures in creditworthiness assessment. Findings For ARP borrowers, upward trend and low volatility reveal their creditworthiness. In order to identify creditworthy borrowers beforehand, ARP financiers who have elaborated more soft information and less hard information can perform better. Originality/value This study first discussed ARP finance from a critical perspective and underlines borrower assessment to eliminate the defect of loose recourse. The empirical evidence presents the sales features of creditworthy borrowers. Moreover, the results suggest an efficient approach for ARP financiers to conduct better assessment.
Dissertations / Theses on the topic "Borrower creditworthiness"
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Жепко, О. П. "Удосконалення оцінки кредитоспроможності позичальника з урахуванням галузевих особливостей його діяльності." Thesis, Національний університет державної податкової служби України, 2011. http://essuir.sumdu.edu.ua/handle/123456789/63112.
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Зважаючи на умови сучасної ринкової економіки, постає важливе питання
об'єктивного визначення кредитоспроможності позичальника банку. На сьогоднішній день
кожний банк розробляє власні підходи щодо оцінки кредитоспроможності позичальника.
Але в даних методиках основна увага приділяється дослідженню фінансового стану клієнта.
Врахуванню галузевих особливостей діяльності позичальника належить недостатня роль при
оцінці кредитоспроможності, що в свою чергу і зумовлює актуальність даної проблеми.
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Гриценко, Костянтин Григорович, Константин Григорьевич Гриценко, and Kostiantyn Hryhorovych Hrytsenko. "Simulation of Scoring of the Bank’s Borrowers Creditworthiness." Thesis, Sumy State University, 2018. https://essuir.sumdu.edu.ua/handle/123456789/80618.
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Розглянуто основні принципи кредитного скорингу. Наведено характеристики позичальників банку, використані при побудові моделей логістичної регресії, дерева рішень та нейронної мережі. Проведено вибір найякіснішої моделіРассмотрены основные принципы кредитного скоринга. Приведены характеристики заемщиков банка, использованные при построении моделей логистической регрессии, деревья решений и нейронной сети. Проведен выбор наиболее качественной модели
The advantages of credit scoring are considered. The characteristics of bank borrowers used in the construction of logit model, decision tree and neural network are described. The choice of the best model is made.
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Костенко, В. В. "Оцінка кредитоспроможності потенційного позичальника як інструмент управління кредитним ризиком банківської установи." Thesis, Сумський державний університет, 2014. http://essuir.sumdu.edu.ua/handle/123456789/38741.
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До одних із найбільш прибуткових активів банку, які формують вагому частину доходу, відносяться кредити. Здійснення кредитних операцій супроводжується вагомими ризиками. А це свідчить про те, що підвищення прибутковості операції призводить до підвищення ризиків. Ризикована кредитна політика банківської установи може стати однією з головних причин, що призведе до його банкрутства. Постійне удосконалення стратегії і тактики ведення кредитної діяльності є невід’ємною складовою розвитку вітчизняних банківських установ. Забезпечення ефективного розвитку банківського сектору можливе за умов зниження рівня кредитного ризику. Одним з головних інструментів зменшення ризиків в кредитній діяльності банків є оцінка кредитоспроможності потенційного позичальника.
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Баранова, А. О. "Моделювання процесу оцінювання кредитоспроможності позичальників банку." Master's thesis, Сумський державний університет, 2019. http://essuir.sumdu.edu.ua/handle/123456789/75941.
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У роботі досліджено сутність оцінювання кредитоспроможності позичальника банку як складової кредитної діяльності банку та обґрунтувано доцільність застосування кредитного скорингу. Основною метою цього дослідження є розробка моделі оцінювання кредитоспроможності позичальника-фізичної особи на основі підходу кредитного скорингу.The master’s thesis focuses on the essence of the credit borrower's creditworthiness assessment as a component of bank credit activity is investigated and the expediency of using credit scoring is grounded. The main aim of this research is to develop a model for assessing the creditworthiness of a borrower-individual based on a credit scoring approach.
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Моісеєнко, М. А. "Кредитоспроможність підприємства та напрями її покращення." Master's thesis, Сумський державний університет, 2018. http://essuir.sumdu.edu.ua/handle/123456789/71548.
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У роботі розкрито теоретичні та практичні основи кредитоспроможності позичальника та напрями її покращення.В работе раскрыты теоретические и практические основы кредитоспособности заемщика и направления ее улучшения.
The theoretical and practical bases of the borrower's creditworthiness and directions of its improvement are revealed.
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Самойленко, В. В. "Моделювання оцінювання кредитоспроможності позичальників банківських установ." Master's thesis, Сумський державний університет, 2018. http://essuir.sumdu.edu.ua/handle/123456789/69492.
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У роботі досліджено сутність банківського кредитування та кредитоспроможність позичальника, проведений аналіз існуючих моделей для розгляду та дослідження кредитної політики банку, в тому числі методу CAMPARI. Наведені основні вимоги до створюваної моделі. Проведена апробація моделі та оцінка її адекватності на прикладі діяльності «Сумського НВО ім. М.В.Фрунзе».The essence of bank lending and borrower's creditworthiness has been investigated in the work, an analysis of existing models for reviewing and researching the bank's credit policy, including the CAMPARI method, has been carried out. The basic requirements for the created model are given. Approbation of the model and assessment of its adequacy on the example of PJSC «Sumy NPO» was estimated.
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Дерябин, С. Д., and S. D. Deryabin. "Совершенствование управления заемными средствами в бизнесе : магистерская диссертация." Master's thesis, б. и, 2021. http://hdl.handle.net/10995/98214.
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Положения научной новизны, изложенные в диссертации:
- расширено содержание понятия «кредитоспособность» коммерческой организации, акцентируя внимание на необходимости периодической оценки менеджментом финансовых возможностей компании;
- определена тенденция в формировании информационной базы оценки кредитоспособности в современных условиях и предложено дополнительное решение в подготовке наиболее полных данных о бизнесе;
- разработан порядок определения долговой нагрузки по ключевым показателям, позволяющий оперативно представлять информацию для управления компанией.
Практическая значимость работы заключается в разработке рекомендаций по совершенствованию управления привлечением и использованием заемного капитала, которые могут использоваться значительной частью коммерческих организаций.The provisions of scientific novelty set out in the dissertation: - the content of the concept of "creditworthiness" of a commercial organization has been expanded, focusing on the need for management to periodically assess the company's financial capabilities; - a tendency in the formation of an information base for assessing creditworthiness in modern conditions was determined and an additional solution was proposed in the preparation of the most complete data on business; - a procedure for determining the debt burden by key indicators has been developed, which makes it possible to promptly provide information for the management of the company. The practical significance of the work lies in the development of recommendations for improving the management of attracting and using debt capital, which can be used by a significant part of commercial organizations.
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Коваленко, Г. Ю. "Кредитна політика банку." Master's thesis, Сумський державний університет, 2018. http://essuir.sumdu.edu.ua/handle/123456789/71934.
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У роботі визначено теоретичні основи та науково-методичні рекомендації щодо удосконалення формування кредитної політики банків України. За результатами дослідження сформовано рекомендації щодо удосконалення механізму формування кредитної політики банку, зокрема, шляхом розробки та впровадження гнучкої системи визначення умов кредитування на основі прогнозування кредитоспроможності позичальника.В работе определены теоретические основы и сформированы научно-методические рекомендации по совершенствованию формирования кредитной политики банков Украины. Автором разработаны рекомендации по совершенствованию механизма формирования кредитной политики банка, в частности, путем разработки и внедрения гибкой системы определения условий кредитования на основе прогнозирования кредитоспособности заемщика.
The work identifies the theoretical foundations and formulated scientific and methodological recommendations for improving the formation of the lending policy of the banks of Ukraine. The author has developed recommendations for improving the mechanism for formulating a bank’s lending policy, in particular, through the development and implementation of a flexible system for determining credit conditions based on forecasting the borrower's creditworthiness.
Books on the topic "Borrower creditworthiness"
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Mckenzie, David. An Econometric Analysis of the Creditworthiness of IBRD Borrowers. The World Bank, 2002. http://dx.doi.org/10.1596/1813-9450-2822.
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Hoffman, Philip T., Gilles Postel-Vinay, and Jean-Laurent Rosenthal. Dark Matter Credit. Princeton University Press, 2019. http://dx.doi.org/10.23943/princeton/9780691182179.001.0001.
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Prevailing wisdom dictates that without banks countries would be mired in poverty. Yet somehow much of Europe managed to grow rich long before the diffusion of banks. This book draws on centuries of loan data from France to reveal how credit abounded well before banks opened their doors. The book shows how a vast system of shadow credit enabled nearly a third of French families to borrow in 1740, and by 1840 funded as much mortgage debt as the American banking system of the 1950s. The book traces how this extensive private network outcompeted banks and thrived prior to World War I—not just in France but in Britain, Germany, and the United States—until killed off by government intervention after 1918. Overturning common assumptions about banks and economic growth, the book paints a revealing picture of an until-now hidden market of thousands of peer-to-peer loans made possible by a network of brokers who matched lenders with borrowers and certified the borrowers' creditworthiness. The book challenges widespread misperceptions about French economic history, such as the notion that banks proliferated slowly, and the idea that financial innovation was hobbled by French law. By documenting how intermediaries in the shadow credit market devised effective financial instruments, this compelling book provides new insights into how countries can develop and thrive today.
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De Laurentis, Giacomo, Eugenio Alaio, Elisa Corsi, Emanuelemaria Giusti, Marco Guairo, Carlo Palego, Luca Paulicelli, et al. Rischio di credito 2.0. AIFIRM, 2021. http://dx.doi.org/10.47473/2016ppa00030.
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The EBA Guidelines on loan origination and monitoring (hereinafter "GL LOM") undoubtedly represent a substantially new piece of the banking regulatory framework. In fact, for the first time, the regulator moves into a topic that was traditionally outside the scope of financial regulation, so far almost exclusively focused on aspects directly linked to both micro- and macro-prudential stability, notably through capital and liquidity management requirements and guidelines on Business Model and Internal Governance. The credit management process, and in particular loan origination and monitoring, has always been typically considered as a business issue under sole responsibility of banks, as it is considered one of the "core" processes (if not the "core" process) of the banking business. As a matter of fact, since the issue of the capital requirement regulation (i.e., Basel II and Basel III), and the introduction of the use requirements for the rating systems, the regulator moved very close, but not yet, to prescribe specific credit assessment criteria, while dictating methodological and organizational requirements for the authorization of the rating systems, and leaving substantial freedom to banks to define their own models and embedded assessment criteria and indicators. With the GL LOM, the regulator takes a further step, remarkably beyond its traditional remit, dictating principles and rules for the evaluation of the credit quality of borrowers. The starting point for this new approach from the regulator can be found in the ECB guidelines on Non-Performing Loans, later endorsed by the Bank of Italy Guidelines for Less Significant Banks, aimed at encouraging banks to define their NPL management processes and establish reduction plans to achieve NPL ratio targets in line with the regulator's expectations. Consistently with the focus on NPL, the regulation on Calendar Provisioning, amending the CRR was issued; as being a Regulation, it involves all banks, and not only significant ones (for which the ECB Addendum also applies). In addition, the new definition of default (the so-called "new Dod") has defined stricter criteria for the transition of exposures to the default status and also made the return of "cured" exposures to the performing status more difficult. The combined effect of these regulatory changes has been to make the default of counterparties not only more probable but also much more "expensive" for the banks. The natural “next step” of these regulatory changes was to "move backward" into the management process covering loan origination and monitoring . The EBA's stated objective with the issuance of the GL LOM is to define "robust and prudent" standards of lending practices so as to maintain a low level of NPLs in the future. Therefore, the focus of the GL LOM is the definition of requirements (some outlined as prescriptions, others in terms of principles) for the creditworthiness assessment of counterparties and for the management of the related data and information. Notwithstanding the fact that the Final Report has articulated the principle of proportionality much more clearly as compared to the Consultation Paper, the GLs set out three macro-categories of counterparties for which specific requirements are defined: • Individuals • Micro and small businesses • Medium and large companies. The GL LOM also provide recommendations about the valuation of guarantees both at origination and during ongoing monitoring, encouraging the use of advanced statistical models. The GL LOM focus on real estate guarantees, while financial collateral is outside the scope of the GL LOM. In the mind of the regulator, the GL LOM should not only reflect industry practices, but also incorporate the latest supervisory guidance on lending, and provide the stimulus to include ESG, AML/CTF and the use of innovative technologies into banking origination and, where applicable, monitoring processes.
Book chapters on the topic "Borrower creditworthiness"
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Zhilina, Nadezhda N., Marina R. Magdeeva, Vladimir G. Ignatev, Ilgiz I. Nurtdinov, and Lubov V. Gusarova. "A Comparative Analysis of the Methods Used to Assess Borrower Creditworthiness." In Frontier Information Technology and Systems Research in Cooperative Economics, 991–99. Cham: Springer International Publishing, 2020. http://dx.doi.org/10.1007/978-3-030-57831-2_106.
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Cranston, Ross, Emilios Avgouleas, Kristin van Zweiten, Theodor van Sante, and Christoper Hare. "18. Security." In Principles of Banking Law. Oxford University Press, 2018. http://dx.doi.org/10.1093/he/9780199276080.003.0018.
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This chapter discusses security in lending. Lending is in some cases unsecured, where the standing of the borrower is such that the banks cannot demand it or, because of the creditworthiness of the borrower, do not regard it as necessary. However, much international lending is now oriented towards particular projects, and security is taken. Security is often required so that the bank can recoup itself out of the collateral in the event of default. In relation to project financings, the security required by the banks will often be of a comprehensive nature; for example a fixed and floating charge, a charge over shares, a legal assignment of material contracts, and so on. With syndicated lending, the security might be granted in favour of a security trustee to hold to the benefit of the members of the lending syndicate. Within a corporate group, each member may contribute to the security, and there will be cross-guarantees.
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Goyal, Somya, and Arti Saxena. "Creditworthiness Assessment Using Natural Language Processing." In Advances in Computational Intelligence and Robotics, 120–41. IGI Global, 2021. http://dx.doi.org/10.4018/978-1-7998-7728-8.ch007.
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NLP is a wide and quickly developing segment of today's new digital technology, which falls under the domain of artificial intelligence. Alternative approaches for qualifying and quantifying an individual's creditworthiness have emerged in recent years as a result of recent advancements in AI. Banks and creditors may use AI to rate potential borrowers' creditworthiness based on alternative data, such as social media messages and internet usage, such as which websites people visit and what they buy from e-commerce stores. These digital footprints may show whether or not an individual is able to repay their debts. In this chapter, how the approaches of NLP could offer financial solutions to unbanked communities is explored. This chapter includes the use of various machine learning algorithms and deep learning to find the most accurate credit score of a user. Since NLP is less intrusive than providing direct access to a person's entire contact list or a social media site, it is a more accessible way to measure risk while still having the potential to target a larger audience.
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Darbellay, Aline. "The Role of Credit Rating Agencies in Sovereign Debt Markets." In Sovereign Debt and Human Rights, 146–66. Oxford University Press, 2018. http://dx.doi.org/10.1093/oso/9780198810445.003.0009.
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Since the global financial crisis of 2007-2009, the leading credit rating agencies (CRAs) have faced an increasing level of legal and regulatory scrutiny in the United States (US) and in the European Union (EU). This chapter sheds light on the promise and perils of sovereign credit ratings in the light of the European sovereign debt crisis. The leading CRAs have been blamed for providing investors with inaccurate credit ratings, facing inappropriate incentives and lack of oversight. This chapter addresses the evolving function performed by CRAs over the past century. Traditionally, CRAs are private market actors assessing the creditworthiness of borrowers and debt instruments. Since the first sovereign bond ratings assigned in 1918, the rating business has grown in size and importance. Sovereign ratings supposedly predict financial distress of governments. Their role has shifted over the last four decades. Although they have repeatedly been blamed for being poor predictors of sovereign debt crises, CRAs continue to play a key role in modern capital markets.