Analysis of Existing Approaches About Management and Minimization of Credit Risk

Abstract

The efficiency of banking performance, related to ensuring reliable protection for banks from credit risk by borrowers, requires resolving multiple issues related to the analysis of their creditworthiness and reliability, as well as development of methods and models to predict the consequences of non-repayment or overdue loans from the borrowers‘ side for the further effective functioning of a bank. Taking into account a considerable amount of scientific works devoted to the research of influence of credit risk on banking there is still a necessity in improvement of existing methods of credit risk management. The article is devoted to the research of the influence of credit risk on banking in Ukraine, in regard to the analysis of the domestic and foreign approaches and methods of determining banking credit risk; quality of its management and minimization, analysis of the legislation on the definition of exposure to borrower's credit risk; analytical reviews of indicators of the banking system, in particular, research of the banking credit portfolio structure for revealing the reasons of change of particular indicators. And, consequently, their influence on the financial sustainability and bank solvency. The research pays attention to intermediary organizations as participants of contractual relations between banks and borrowers. The authors give their own vision of the efficiency of measures taken by the government to stabilize banking and assess the introduced models of banking credit risk management from a scientific perspective . The analysis of the indicators showed a growing share of non-performing loans, in particular, the number of overdue assets in the credit portfolio of banks. Which would be caused by the declining production and a decrease in the level of solvency of the population against the background of general political and economic instability in the country. The study identified the lack of effectiveness of the existing legislation related to credit policy and the work with non-performing loans, which would have contributed to the protection of the banking system from the existing credit risk and corresponded to realities of the modern state of the economy. Key words: banking, overdue assets, overdue loans, credit, credit risk, credit portfolio.