Credit Appraisal and Credit Risk Management

THE STRATEGIC VALUE OF THE QUALITY CONTROL PROCESS IN THE MORTGAGE INDUSTRY (2003) The mortgage industry has originated record loan volumes month after month for the last three years. The sub-prime segment in particular has greatly benefited from the boom in the housing market buoyed by interest rates that have approached historical lows. However a second condition is critical to explaining the dramatic expansion of the sub-prime segment: the unprecedented access to large amounts of financial resources which has been leveraged to fund lenders’ growth. Institutional investors reacted to equity markets far more unpredictably than in the bubble years by redirecting a greater share

The banking industry has undergone major upheaval in recent years, largely due to the lingering recessionary environment and increased regulatory environment. Many banks have failed in the face of such tough environmental conditions. These conditions

The idea of “risk” is used in many fields and industries. There has been large efforts made towards the understanding of risk. Since, risk varies so much depending on the field of study, the need for learning about it is warranted. As can be imagined, the importance of risk in a market economy is crucial. In the 1990s, JP Morgan made the Value at Risk (VaR) a central component of its work efforts (Cecilia-Nicoleta, Anne-Marie, & Carmen-Maria, 2011).

Credit risk is the risk that the bank will not be able to repay funds when they ask for them.

To address the risk associated with business account kiting schemes, credit unions should perform a risk assessment by evaluating the business member’s creditworthiness before approving a checking account. The idea is to offer checking accounts to business members who are least likely to abuse the account, which could result in large losses to the credit

Credit risk consists of three parts: the size of the exposure at the time of default, the probability of default occurring, and the loss if the credit event occurs (Fraser & Simkins, 2010). Undoubtedly, a combination of a clear strategy, a knowledge of analytical tools, an understanding of the risk management instruments, responsible oversight, and the ability to be intuitive is crucial to risk management (Bethel, 2016). Wells Fargo is one of the most successful banks in the United States in managing risk. Successfully, they have navigated through risk by choosing a course of action determined by their risk management process (Perez, 2014).

Since the onset of the financial crisis 2008, the sovereign debt crisis in western economies and the new financial regulation with Basel III coming up, the financial industry faces the challenge of reinventing itself. The ring-fence for Commercial and Investment Banking, and new economic and regulatory capital requirements will determine the kinds of products banks will be able to distribute. It will have a huge impact in the Investment Banking business, which will suffer tough regulation and supervisory procedures. At the same time, credit risk models will be reviewed because they have failed to predict the crisis of 2008. The current financial and economic crisis doesn’t have any precedent in the past.

The National Association of Credit Management (NACM) is an organization that provides business Credit services. “As the advocate for business credit and financial management professionals NACM and its network of Partners take great pride in being the primary learning, knowledge, networking and information resource for commercial creditors nationwide” (NACM, 2015). The parts of The National Association of Credit Management that we will explore include the goals of the organization, its history, the four departments of member benefits, and signs of Fraud. As a non-profit organization the NACM has placed a level of quality for the credit professionals in credit and finance branches of business

For the community bank, goals are incorporated into the risk management program established by the CRO and management. To ensure the bank serves the local community, the identification and management of risks and loss exposures, in addition to, policies and procedures enable the institution to thrive. Tolerable uncertainty, legal and regulatory compliance, economy of operations, social responsibility are pre-loss goals, whereas, survival, business continuity, profitability and growth, and earnings stability are post-loss goals. The attainment of each risk management is addressed.

When you deal with any lender, it is of great advantage to have a good or very good credit rating. Suppose you know that your mortgage will have to be renewed in two years. You may need to either repair your credit and/or improve your credit scores.

Market risk is the risk associated with an investors day to day investments, that are affected by constant fluctuations in the markets. With investment banking, a banks reputation is a critical in its success, reputational risk describes the trustworthiness of a business. A firm with a poor reputation will not get as much business, meaning a bad reputation results in a loss in revenue. Concentration Risk is the risk showing the spread of a banks’ accounts to various debtors to whom the bank has lent to. The Basel II accord stated that ‘operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events’. This risk covers the very wade basis of a company’s operations, there are many different factors involved here: people, employees actions and company processes.

Payment risk refers to the possibility that a bank may be asked to transfer funds which it does not receive. The risk arises from the fact that instructions to a bank to make payment can be

The aim here is to look at the state in which the financial market is at the moment after being hit by the 2007-2008 financial Crisis. The first part of this report introduces some key issues that have affected the confidence in the banking sector and its importance in the banking sector. The second part will provide explanations on how to restore confidence.

The Awards were presented by the Asian Bankers Association (ABA) and Bank Marketing Association of the Philippines (BMAP) in the Asia Pacific Bankers Congress (APBC) 2004 on March 26, 2004 in Manila, Philippines.

List of abbreviations List of tables Acknowledgements Abstract 1. 2. 3. 4. 5. 6. 7. 8. Introduction Problem statement Objectives and hypothesis of the study Literature review Structure and performance of the financial sector in