Credit risk mitigation

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

17 July 2013 Respected Sir;
I am an article of second year and my principal has assigned me a work related to audit of credit risk mitigation of a MNC bank. Kindly help me earnestly to know what to do regarding this assignment
regards.

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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25 August 2013 Credit risk is the primary financial risk in the banking system and exists in
virtually all income-producing activities. How a bank selects and manages its
credit risk is critically important to its performance over time; indeed, capital
depletion through loan losses has been the proximate cause of most institution failures. Identifying and rating credit risk is the essential first step in managing it effectively.
The OCC expects national banks to have credit risk management systems that
produce accurate and timely risk ratings. Likewise, the OCC considers
accurate classification of credit among its top supervisory priorities. This
booklet describes the elements of an effective internal process for rating
credit risk. It also provides guidance on regulatory classifications
supplemental to that found in other OCC credit-related booklets, and should
be consulted whenever a credit-related examination is conducted.
This handbook provides a comprehensive, but generic, discussion of the
objectives and general characteristics of effective credit risk rating systems. In
practice, a bank’s risk rating system should reflect the complexity of its
lending activities and the overall level of risk involved. No single credit risk
rating system is ideal for every bank. Large banks typically require
sophisticated rating systems involving multiple rating grades. On the other
hand, community banks that lend primarily within their geographic area will
typically be able to adhere to this guidance in a less formal and systematic
manner because of the simplicity of their credit exposures and management’s
direct knowledge of customers’ credit needs and financial conditions.
Functions of a Credit Risk Rating System
Well-managed credit risk rating systems promote bank safety and soundness
by facilitating informed decision making. Rating systems measure credit risk
and differentiate individual credits and groups of credits by the risk they pose.
This allows bank management and examiners to monitor changes and trends
in risk levels. The process also allows bank management to manage risk to
optimize returns.

Querist : Anonymous

Querist : Anonymous (Querist)

30 September 2013 Respected Sir,
Thank you for the answer but I want u to tell me what exactly one has to do in this audit.Sir what I should read in order to perform it properly because I know I am not able to do it properly but I want desperately to do it in a excellent way because I want to make my career in the banking industry.Earnestly waiting for ur reply.
Regards.

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