[Role of Credit Risk Management During Financial Crisis]

by

Acknowledgement

This research would not have been possible without my supervisor & my family support. I want to thank them for their unlimited support & guidance through out this project.

DECLARATION

I, [type your full first names & surname here], am declaring that the matter of this research/thesis shows my own unaided work, & that the research/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own ideas & not necessarily those of the University.

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Abstract

This dissertation is based on the topic of “Role of credit risk management during financial crisis”. The first chapter provides an introduction to the topic including the purpose and significance of the study. The second chapter presents a review of relevant literature, highlighting the previous research carried out in this field. The third chapter covers the methodology for this study, followed by the analysis of findings and discussion in the fourth chapter. The fifth chapter concludes the dissertation, providing implications and useful recommendations for further research.

Table of Contents

ABSTRACT1

1.INTRODUCTION4

Background4

Purpose of the Study5

Research Objectives5

Research Questions:6

Defination6

Significance of the Study7

Functions of Credit Risk management7

Credit risk in international business:8

Credit risk in banking sector leads to global financial recession8

Scope of the Research9

2. LITERATURE REVIEW10

The role of credit risk management during the financial crisis10

Credit risk leads to financial recession:10

Role of Credit Risk Management in overcoming financial crisis:11

Failure of Credit Risk Management in controlling financial crisis11

Global meltdown helps credit risk management strategists to search for new options12

Enabling Risk Management12

Banking regulation13

Risks of financial institutions17

Risk policy20

3.RESEARCH METHODOLOGY23

Research Design23

Instrumentation and Questionnaire24

Data Collection25

Data Presentation25

Quality of data26

Variables26

Ethical considerations26

4.FINDINGS AND ANALYSIS27

Results30

Goodness of Risk Models33

Validity of methods for monitoring the outstanding risk36

The organisation of recoveries37

The modern credit risk models39

RAROC construction involves the following stages44

5.CONCLUSION45

Summary45

Implications46

Recommendations47

Conclusiion49

REFERENCES52

APPENDIX55

Introduction

Background

Every human being and companies of this generation felt the real effect of the Great Depression of late1930s and early 1940s. In the current financial crisis credit risk became a major component and allowed the companies and market strategists to rethink on the credit risk management. The decision of credit granting made by several business analysts is become the main source of credit risk in banking sectors. So there is a need to implement competent evolution to overcome the financial recession.

The past decade was rich in events related to credit risk. Financial institutions have acted on several fronts stimulated by the experiences and advances in financial theory. This chapter reviews selected topics have been chosen for their current and future importance. The definition of a risk policy, risk rating models, recoveries and internal models of credit risk. The evolution of credit risk management is marked by an increasing weight of the use of models and quantitative methods in an irreversible and fruitful, but not without risks. The importance of human capital to successfully guide the process of change.

Who is to blame for current problems? In my opinion is shared by the entities themselves with speculative investments and time, beyond prudent limits and consistent with the resources received from their clients, and inappropriate use of management ...