Risk of Credit
Extension of credits that have been established for many companies and institutions in the financial instruments and market penetration depth, and thus increase the risk of loss and destruction of assets, then the waves of uncertainty when you do not have the time or advice to reduce the risk of bad credit.
Risk of credit.- “It is possible losses due to the failure of the borrower or counterpart in a transaction directly or indirectly resulting from non-payment, partial payment or lack of time in the agreed payment obligations.” (The most important is to set the value of risk)
It is important that a bank or credit must judge the solvency of their current and future borrowers and efficiently manage the portfolio, considering that “to extend credit” could be involved in three types of risk:
1) The risk of liquidity,
2) Instrumentation and legal risk
2) Risk solvency.
The first refers to the lack of money by debtors to pay, reflecting the failure can not make payment within a specified period or after that date has been scheduled under the contract. Second caution or lack of knowledge in the conclusion of the agreement, contract, agreement preparation notes, bills of exchange, or legal instruments that require the debtor to pay (information asymmetry) and the third risk can occur for a lack of real analysis and identification of subjects who do not have a credit asset or collateral for the payment of its obligations.
Therefore, the institution must establish loan administration and efficient pattern of credit risk management discussed in the business, in resonance with their own risk profiles, market segmentation with the characteristics of the market in which the operation and offer credit products
Symptoms and signs of the behavior of the credit portfolio is very important for the classification of clients at this time and the future, this methodology and analysis techniques based on historical operating performance and credit quotas, are expected to determine damages based on the default probability, the level of exposure and loss severity calculations for all component must have a database of at least three years immediately prior, which contains enough information to calculate the expected loss.
