Means of Reducing Credit Risk

Abstract

Credit risk represents the possibility that the bank will suffer a loss of income because some borrowers cannot exactly follow the lender's repayment terms from different kind of reasons. In such cases, the account of the customer inevitably becomes overdue, the granted loan turns into a non-performing credit and the lending bank registers a decline of its profit. In order to prevent such situations, commercial banks must take certain measures of reducing credit risk.

Keywords: credit risk, credit analysis, credit pursuit, guarantees, prudent regulation, provisions

JEL Classification: G21