Comparison of Financial Performance in Banking Sector of UK, Credit Risk Management

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TABLE OF CONTENTS

CHAPTER 01: INTRODUCTION1

1.1 Background of the Study1

1.2 Aim and Objectives5

1.3 Research Questions5

1.4 Significance of the Study6

1.5 Layout of the Dissertation6

CHAPTER 02: LITERATURE REVIEW8

2.1 Introduction8

2.2 Overview of Credit Risk Management8

2.3 Financial Performance and Credit Risk Management10

2.4 Credit Risk Management Models12

2.5 Financial Development13

2.6 Banking Industry and Financial Performance16

2.7 Financial Performance of Individual Retail Banks17

CHAPTER 03: RESEARCH METHODOLOGY18

3.1 Introduction18

3.2 Overview of the Quantitative Research18

3.3 Philosophy of Research19

3.4 Research Instrument20

3.5 Sample20

3.6 Informed Consent21

3.7 Reliability and Validity21

3.8 Confidentiality22

3.9 Ethical Concerns23

3.10 Analysis of the Gathered Data23

3.11 Conclusion23

REFERENCES24

CHAPTER 01: INTRODUCTION

1.1 Background of the Study

According to Al-Khouri (2011), banks have a strong connection with the development of the economy because of the services that they provide. The role of intermediation is considered to be a catalyst for the growth of the economy. The effective and efficient performance of the financial institutions in the banking sector over the period of time is considered to be an index for the financial stability in any country. Management of credit risk in any institution initiates due to the establishment of the principles of lending and with the development of a framework that is responsible for the management of risk.

According to Arzu and Gokhan (2005), policies, guidelines and standards, in combination to the risk concentrate on the limits that are designed using the guidelines of the committee of risk management supervision. These, policies, procedures and standards are helpful in governing the ways in which credit risk is measured, controlled, monitored and reported. As the conditions of the market are changing in a rapid manner, effectiveness and adequacy of the internal controls must be reviewed quarterly. The diversity of the economic and business conditions has led to the development of the tools that are highly sophisticated and are measured for the exposure of the financial institutions to the risk of credit.

According to Bansal and McDougall (2004) the industry of banking is considered to be a significant source for financing almost every business. The basic assumption that indicates the financial performance of the banks is based on the discussion and researches which have shown the increasing performance of the banks based on the financial indicators leads to improved activities and functions of the banks. The subject of financial research and performance has advanced with the management and finance fields. It has also been argued that there exist three principles of the factors that can improve the performance of the banking institutions, based on the size of the institution, management of the assets and the operational efficiency. There are still less studies that have been published on the effect that these factors may have on the performance of the banks, most importantly of the commercial banks.

According to Benand Omran (2008) the performance of the banks based on their financials is dependent upon multiple factors such as analysis of the financial ratios, benchmarking, and measurement of the performance with respect to the budget. It is also clear from the existing literature ...