Question
CREDIT RISK MANAGEMENT
Credit risk policy is one of the most important instruments of economic policy. Experiences from
developed countries and countries in transition show that the optimal credit risk policy is an
essential prerequisite for accelerating economic development. The effectiveness of the
mechanism in achieving this goal involves the fulfilment of certain conditions: stabilization of
prices and elimination of price disparities, coordination of movements of exchange rates,
inflation, and interest rates, etc. In countries with a diversified financial structure, achieving
these prerequisites, as well as the formation of interest rates on the balanced value is realized
through the action of the market mechanism. Given that most of these issues are present in every
country, it is necessary to identify and critically re-assess the effects of credit risk policy on
economic developments, as well as preventive measures to reduce risk. While financial
institutions have faced difficulties over the years for a multitude of reasons, the major cause of
serious banking problems continues to be directly related to credit standards for borrowers and
counterparties, portfolio risk management, or a lack of attention to changes in economic or other
circumstances that can lead to a deterioration in the credit standing of a bank’s counter
counterparties.
Required: –
a) Choose one bank from your country (the choice is yours). Describe the overall history and
development of the bank. You also expected to discuss on the operation of the bank and the
issues that the bank encountered in the day to day operation.
(Marks = 40 Marks)
b) Discuss the types of credit risk the bank face. How the credit risks have effect on the
performance of the bank and what are the risk management methods has been practiced
controlling the exposures by the bank. You must support you answers with sound academic
articles.
(Marks = 60 Marks)
(Total Marks = 100 Marks)
End of Questions