Among the main reasons for credit risk is the lender’s uncertainty about the solvency and responsibility of the borrower. Failure to fulfill the conditions and going beyond the terms of the loan agreement are possible in the following cases:
This type of assessment is the maximum amount of loss that the financial institutions find acceptable for a certain time period with a pre-calculated probability. Among the common causes of loss is a decrease in the loan portfolio value, which occurs as a result of complete or partial loss of solvency of a large number of borrowers.
This analysis is a rather complex process that focuses on the applicant’s ability and intention to repay the loan. The concept of a quality assessment implies a collection of the most detailed information about borrowers. The borrower’s credit history, financial condition, business perspectives, and the environment are studied. The analysis is carried out in seven basic steps.
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