0.9 Credit Risk and Credit Policies

Question 1

In Credit risk, which parameters should be monitored?

Answer 1

Insolvency Risk (PD); Recovery Risk (LGD); EAD (Exposure risk) and M (Maturity risk)

Question 2

Name 4 phases of Credit Mng

Answer 2

1) Credit policy (planning return / risk)
2) Granting / Auditing (provision of service)
3) Risk Control (quality control of credit portfolios)
4) Mng of not performing / impaired credits (distressed credit mng)

Question 3

Describe Credit policy process

Answer 3

1) Planning:
Exposure plan: differentiated credit policies. Important to be efficient in risk assesment but also in time of decision.
2) Strategic Marketing: Make a market analysis.

Question 4

Describe the process of Auditing / Granting

Answer 4

-Investigation: colection of data
-Deliveration
-Operational Mng: answer to customer, and we need to formalize the activity. Administrative activity is important to receive signals from customers

Question 5

Describe the process of Risk Control:

Answer 5

Credit monitoring: risk profile of different borrowers. We have monthly update of information. combine together 2 kinds of data:1) industry trends/events. 2) behavior of company (timely payment of installments, following deadlines): story of the customer

Question 6

Describe the process of Credit Mng.

Answer 6

• Unlikely to pay: means we had some delays in the history
• Not performing loans Mng: Going to the worst situation