Conducting an analysis of the structural composition (assets, liabilities, equity, profit, losses, profitability, liquidity), the quality of the loan portfolio using the example of the East Siberian Savings Bank of Russia, consideration of the methodology for assessing its creditworthiness

Send your good work in the knowledge base is simple. Use the form below

Students, graduate students, young scientists who use the knowledge base in their studies and work will be very grateful to you.

MINISTRY OF EDUCATION AND SCIENCE OF THE RUSSIAN FEDERATION

FEDERAL AGENCY FOR EDUCATION

BRANCH OF THE RUSSIAN STATE SOCIAL UNIVERSITY IN KRASNOYARSK

Department of Finance and Credit

GRADUATE WORK

on the topic: Optimization of the loan portfolio (using the example of the Krasnoyarsk City Branch of Sberbank of Russia No. 161)

• Introduction
• 1.2 The concept of loan portfolio quality.
• 1.4 Legal regulation of bank lending activities
• 2. Analysis of the loan portfolio of a commercial bank using the example of the Krasnoyarsk city branch of Sberbank of Russia No. 161
• 2.1 Analysis of the financial situation of the Krasnoyarsk City Branch of Sberbank of Russia No. 161
• 2.2 Characteristics of the lending activities of Sberbank of Russia OJSC.
• 2.3 Analysis of the loan portfolio of Sberbank of Russia OJSC
• 3. Measures to optimize the loan portfolio
• 3.1 Problems of diversification of loan portfolios of commercial banks in Russia
• 3.2 Problems of optimizing the loan portfolio and ways to solve them
• Conclusion
• List of sources used
• Applications

Introduction

The activities of banking institutions are diverse. In modern society, banks engage in various types of transactions. They not only organize money circulation and credit relations, but also finance the national economy, purchase and sell securities, and in some cases carry out intermediary transactions and property management. Credit institutions provide consultations, participate in discussions of legislative and national economic programs, maintain statistics, and have their own subsidiary enterprises.

However, the main historical function of banks is lending.

The domestic banking system is characterized by a stable increase in the amount of loans provided to the borrower with a simultaneous increase in the specific share of overdue loans.

At the same time, with an increase in the total value of the banks’ loan portfolio, the share of overdue loans increases. An interesting factor is that the concentration of lending operations occurs in a limited number of banks. According to Interfax, as banks deepen their specialization in lending, the quality of their loan portfolios gradually begins to improve. Thus, for banks with loans up to 40% of assets, the overdue amount is about 10%, and for banks with the share of loans in assets over 40%, the overdue amount does not exceed 5%.

These figures indicate that the formation of a high-quality loan portfolio is an achievable goal for the bank, and the management of the bank’s loan operations serves to achieve it.

In general, the problems of the Russian banking system are due to two reasons: firstly, there are unfavorable macroeconomic conditions, and secondly, there are internal reasons related to the peculiarities of the activities of commercial banks themselves.

The relevance of the chosen topic of the thesis is due to the fact that credit activity is one of the most important features constituting the very concept of a bank. It would not be an exaggeration to say that the level of organization of the credit process is perhaps the best indicator of the overall work of a bank and the quality of its management.

The purpose of the thesis is to clarify the essence of the loan portfolio of a commercial bank, analyze the loan portfolio, and determine ways to optimize the loan portfolio.

To achieve this goal, it was necessary to solve the following tasks, which determined the structure of the thesis: to study the theoretical aspects of the loan portfolio, revealing its essence; show the factors influencing its quality, analyze the structural composition and quality of the loan portfolio using the example of the East Siberian Bank of Sberbank of Russia, consider the methodology for assessing the creditworthiness of Sberbank; propose ways to optimize the loan portfolio of a commercial bank.

The subject of research in the thesis is the quality of the loan portfolio of a commercial bank.

The object of the study is the East Siberian Bank of Sberbank of Russia.

The scientific novelty of the thesis is as follows: the interpretation of the content of the quality of the loan portfolio of a commercial bank has been clarified; proposed methods for assessing various segments of credit risk; the essence of the loan portfolio of a commercial bank was determined as a set of bank assets in the form of loans, discounted bills, interbank loans, deposits and other credit requirements, classified into quality groups based on certain criteria, methodological approaches to assessing the qualitative composition of the loan portfolio of a commercial bank were clarified; a system of criteria for assessing the reliability of a commercial bank is considered.

The theoretical basis of the thesis was made up of legislative and regulatory acts of the Russian Federation of the Central Bank of the Russian Federation, scientific monographs, dissertation research, articles in economic periodicals ("Banking", "Money and Credit", "Business and Banks", "Russian Economic Journal", " Economics and life"). The theoretical basis of the study was the works of Russian scientists and foreign specialists in the field of assessing the financial condition and analysis of loan portfolios of commercial banks, assessing credit risks: A. M. Tavasiev, V. Kromonova, O. I. Lavrushin, E. B. Shirinskaya, and others . The information base for the study was data from the turnover sheet, profit and loss statement, statistical materials and publications of domestic information and analytical periodicals, including the Central Bank of the Russian Federation.

1. Theoretical aspects of the loan portfolio of a commercial bank

1.1 The essence and concept of a commercial bank’s loan portfolio

In the modern world, credit is an active and very important effective “participant” in national economic processes. Neither states, enterprises, organizations and the population, nor the production and circulation of a social product can do without it. With the help of a loan, resources and capital are transferred, and new value is created. But under certain circumstances, it can also play a negative role - hide the overproduction of goods, the true position of debtors, and contribute to the aggravation of economic and social contradictions.

Credit activity is one of the most important features constituting the very concept of a bank. The level of organization of the lending process is perhaps the best indicator of the overall work of a bank and the quality of its management.

In scientific and educational literature, as well as in regulatory documents, the nature of the loan is sometimes interpreted ambiguously. In this regard, it is necessary to first clarify the key points associated with this concept.

The concepts of "loan" and "credit". In the Civil Code of the Russian Federation, these similar concepts differ meaningfully in a number of ways. From their comparison it follows that a loan (a special case of a loan relationship) has the following inherent properties:

- it should talk about the transfer by one party (the lender) to the other party (the borrower) not of any things, but only of money, and only for temporary use (not into the ownership of the borrower). Moreover, the specified money may not be the property of the creditor himself;

- it cannot, unless otherwise provided in the contract, be interest-free. In this case, the contractual execution (in writing) of issuing or receiving a loan is considered as a mandatory, although not specific to the credit transaction, parameter. For a loan agreement, written form is not always required;

- in it only a credit institution (usually a bank) acts as a lender. In this sense, a loan is a bank loan in monetary form. This refers to the active lending option, when the bank does not receive, but gives a loan;

- the bank’s obligation to issue a loan in accordance with the concluded agreement is unconditional;

- the loan is also returned in cash.

In addition, the need to worry about the future repayment of a loan issued by a bank forces it to usually require from a potential borrower:

1) justification for the reasonableness and economic efficiency of the operation (transaction) for which the loan is requested, which in general means openness and certainty regarding the intended purpose of the loan;

2) providing the lender with the opportunity to control, within certain limits, the intended use of the loan, the effectiveness of such use and, in general, the efficiency of the business of the borrower - a legal entity;

3) providing the lender with known material or other security for the loan issued by him as evidence of the reliability of the relationship between the parties, even in the event of an unsuccessful operation (transaction) by the borrower for which the loan was taken, or in general unfavorable development of the business and financial condition of the borrower.

Finally, the bank must initially credit the loan issued to the borrower to a loan account opened specifically for this purpose.

Summarizing the above points, we can conclude that the loan involves the transfer to the borrower (legal entity or individual) by the bank, on the basis of a special written agreement, of exclusively funds (the bank’s own funds and/or borrowed funds) for a period specified in such an agreement on the terms of repayment and payment in monetary form, control, and also, as a rule, intended use and security.

It should also be borne in mind that the loan takes place not from the moment the parties sign the loan agreement, but from the moment the corresponding amount is actually provided to the borrower.

The concepts of "credit" and "loan". In banking legislation, the term “loan” is not used (in Chapter 38 of the Civil Code this is understood as the gratuitous use of an item received from another person, i.e. something that does not apply to lending). At the same time, it is widely used in Bank of Russia documents and literature. But in neither case is the purpose of its use substantiated, nor the special content that may distinguish a loan from a credit. In fact, these terms are used as synonyms; more precisely, a loan is understood as an active loan.

Bank loans are divided into active and passive. In the first case, the bank gives a loan, i.e. acts as a creditor, in the second he takes a loan, i.e. is a borrower. A bank can enter into credit relationships (take or give loans) with other banks (credit organizations), including the central bank, performing an active or passive function, depending on the situation. In this case, interbank lending takes place. As for all other enterprises, organizations, institutions and individuals (non-financial sector of the economy), the bank’s credit relations with them are of a different nature - here the bank is almost always the party giving the loan.

According to Russian civil law, there are two fundamentally different types of loans.

1) Agreement on the provision of property for temporary free use. The parties to the agreement can be both individuals and legal entities, and its subject is only individually defined things, in contrast to a loan agreement, the subject of which is money or things defined by generic characteristics. A loan agreement, being in many ways similar to a property lease agreement, has the following differences: a) gratuitousness; b) can be not only consensual, but also real; c) the property that constitutes the subject of the contract can be claimed from the owner only by legal entities.

Loans from inventory assets are secured by collateral of these assets, and sometimes by guarantees from higher-level organizations.

2) Bank loan - funds provided by banks in the process of lending against urgent obligations of organizations and citizens or against obligations due at presentation.

Bank credit policy and mechanisms for its implementation.

Before starting to issue loans, the bank must formulate its credit policy (along with and in accordance with its policies in relation to all other areas of activity - deposit, interest, tariff, technical, personnel, in relation to clients, competitors, etc. ), as well as provide ways and means of translating it into real practice.

The formulation of a bank's policy(ies) is one of the stages of planning its activities. To define and approve your credit policy means to formulate and consolidate in the necessary internal documents the position of the bank’s management on at least the following issues:

a) priorities of the bank in the credit market, meaning the preferred ones for this bank:

- lending objects (industries, types of production or other business);

- categories of borrowers (authorities, state and non-state enterprises and organizations, individuals);

- the nature of relations with borrowers;

- types and sizes (minimum, maximum) of loans;

- loan servicing schemes;

- forms of ensuring loan repayment, etc.;

b) lending purposes:

- expected level of profitability of loans;

- other (not directly related to making a profit) goals.

For the bank to make informed decisions on the specified range of issues, a clear and balanced statement of the general goals of the bank’s activities for the coming period (i.e., good planning in general), an adequate analysis of the credit market (i.e., good work of the marketing service), clarity of prospects for the development of the bank’s resource base, a correct assessment of the quality of the loan portfolio, taking into account the dynamics of the level of personnel qualifications and other factors.

In accordance with Regulation No. 254 “On the procedure for the formation by credit institutions of reserves for possible losses on loans...” the authorized body (bodies) of the bank adopts the bank’s internal documents on the classification of loans (loans) and the formation of appropriate reserves, which must comply with the requirements of this Regulation and other regulatory legal acts on issues of credit policy and/or methods of its implementation. In these internal documents, the bank reflects, in particular:

1) a credit risk assessment system that allows classifying loans into quality categories, including containing more detailed procedures for assessing the quality of loans and creating a reserve than provided for in the Regulations;

2) the procedure for assessing loans, including the criteria for their assessment, the procedure for documenting and confirming such an assessment;

3) procedures for making and executing decisions on the formation of a reserve;

4) procedures for making and executing decisions on writing off loans from the balance sheet that are unrealistic for collection;

5) a description of the methods, rules and procedures used in assessing the financial position of the borrower, a list of sources of information used on this issue, the range of information necessary to assess the financial position of the borrower, as well as the powers of bank employees participating in this assessment;

6) the procedure for compiling and further maintaining the borrower’s file;

7) the procedure and frequency of determining the value of the collateral;

8) the procedure and frequency of assessing the liquidity of the collateral, as well as the procedure for determining the amount of the reserve, taking into account the collateral for the loan;

9) the procedure for assessing credit risk for a portfolio of homogeneous loans;

10) the procedure and frequency of formation (regulation) of the reserve.

At the same time, the bank must publicly disclose information about its credit policy as part of the reporting submitted in accordance with the requirements of Bank of Russia regulations.

The role of credit policy can be expressed in the following theses:

The absence of a bank’s own credit policy, or the presence of a weak (poorly thought out, unreasonable) policy, or its formal existence means a lack of planning of the credit process and, therefore, full management of this most important area of ​​activity, which dooms the bank to absolute failure, especially in the middle and long term;

- a high-quality credit policy of the bank, if its provisions are actually used, although it does not guarantee unconditional success, however:

- promotes meaningful coordination of its efforts in the credit market;

- provides the activities of departments involved in the credit process with the necessary “core” and well-thought-out technologies;

- significantly reduces the risk of making incorrect management decisions;

- provides bank management with an important criterion for assessing the quality of management of the credit department and the organization of the credit process in the bank as a whole.

The role of credit policy should be understood as the totality of its functions, i.e. expectations associated with its development and application. Therefore, we can assume that the function of a bank’s credit policy in general is to optimize the credit process, bearing in mind that the goals and priorities for the development (improvement) of lending, determined by the bank, constitute its credit policy.

The provisions of credit policy must be supported by practical measures, which together constitute mechanisms for implementing credit policy. Measures designed to implement the intended credit policy in the expected circumstances (necessary and/or possible actions to be taken) must also be reviewed and approved by the bank's management, and the corresponding decisions are formalized in the form of internal documents.

In principle, among such measures there should or may be those that will make it possible:

- determine the necessary volumes and available (including price factor) sources of replenishment of credit resources, expand the resource base;

- establish and, if necessary, revise acceptable risk values ​​and lending limits (by industry, type of production, category of borrower, per borrower, etc.), the required level of liquidity;

- diversify your credit services and improve their quality, expand the clientele of borrowers (if the credit policy includes such goals);

- it is better to check the creditworthiness of borrowers, to achieve an increase in the level of repayment of issued loans;

- timely and in the required volume form reserves to cover possible losses from lending activities;

- improve organizational, information, analytical and methodological support of the credit process, etc.

A special block of mechanisms for implementing credit policy constitutes a mandatory set of instructions and methodological materials for each bank, regulating all aspects of organizing its work in the credit market.

All provisions of the credit policy are aimed at achieving the highest possible quality of the bank’s lending activities.

The quality of a bank’s lending activities (the quality of the bank’s organization of its lending activities) can be judged by a number of criteria (signs), including:

- profitability of credit operations (in dynamics);

- the presence of a clearly formulated credit policy for each specific period, adequate to the capabilities of the bank itself and the interests of its clients, as well as clearly defined mechanisms (including organizational and information and analytical support) and procedures for the implementation of such a policy (regulations for all stages of a credit operation);

- compliance with legislation and regulations of the Bank of Russia related to the credit process;

- condition of the loan portfolio;

- presence of a working credit risk management mechanism.

Loan portfolio is a set of bank claims for loans, which are classified according to criteria associated with various factors of credit risk or methods of protection against it.

The concept of a bank's loan portfolio is interpreted ambiguously in the economic literature. Some authors interpret the loan portfolio very broadly, including all financial assets and even liabilities of the bank, others associate the concept under consideration only with the bank’s lending operations, while others emphasize that the loan portfolio is not a simple set of elements, but a classified set.

The regulatory documents of the Bank of Russia regulating certain aspects of loan portfolio management define its structure, from which it follows that it includes not only the loan segment, but also various other requirements of the bank of a credit nature: placed deposits, interbank loans, requirements for receipt (repayment) ) debt securities, shares and bills, discounted bills, factoring, claims on rights acquired under a transaction, on mortgages purchased on the secondary market, on transactions for the sale (purchase) of assets with deferred payment (delivery), on paid letters of credit, on financial lease transactions (leasing), for the return of funds if the purchased securities and other financial assets are unquoted or not traded on the organized market.

This expanded content of the totality of elements that form the loan portfolio is explained by the fact that such categories as deposit, interbank loan, factoring, guarantees, leasing, securities have similar essential characteristics associated with the return movement of value and the absence of a change of owner. The differences lie in the content of the object of relationship and the form of movement of value.

Analysis of the bank's loan portfolio is carried out regularly and forms the basis of its management, which aims to reduce the total credit risk through diversification of loan investments and identifying the riskiest segments of the credit market. The main stages of the analysis: selection of criteria for assessing the quality of loans, determination of the method of this assessment (number or point system of assessment, classification of loans by risk groups, determination of the percentage of risk for each group, calculation of the absolute value of risk in the context of each group and in general for the loan portfolio, determination the amount of reserve sources to cover possible loan losses, assessment of the quality of the loan portfolio based on a system of financial ratios, as well as through its segmentation (structural analysis).

When forming a “loan portfolio”, it is necessary to take into account the following risks: credit, liquidity and interest.

Credit risk factors are the main criteria for its classification. Depending on the scope of the factors, internal and external credit risks are distinguished; on the degree of connection of factors with the activities of the bank - credit risk, dependent or independent of the activities of the bank. Credit risks dependent on the bank’s activities, taking into account its scale, are divided into fundamental (related to decision-making by managers involved in managing active and passive operations); commercial (related to the activities of the Central Federal District); individual and aggregate (loan portfolio risk, risk of a set of credit transactions).

Fundamental credit risks include risks associated with collateral margin standards, decisions to issue loans to borrowers who do not meet the bank’s standards, as well as those resulting from the bank’s interest rate and currency risk, etc.

Commercial risks are associated with the credit policy in relation to small businesses, large and medium-sized clients - legal entities and individuals, and with certain areas of the bank's lending activities.

Individual credit risks include the risk of a credit product, service, operation (transaction), as well as the risk of the borrower or other counterparty.

The risk factors of a credit product (service) are, firstly, its compliance with the needs of the borrower (especially in terms of term and amount); secondly, business risk factors arising from the content of the event being financed; thirdly, the reliability of repayment sources; fourthly, the sufficiency and quality of support. In addition, credit risk factors may arise from operational risk, since in the process of creating a product and its variety - services - technological and accounting errors in documents, as well as abuses, may be made.

The technology (mechanism) for providing a specific credit service, which can be conditionally called a type of loan, represents a certain direction of the bank’s credit activities. The type of loan also allows you to classify credit risks: risks of lending under an overdraft, based on a line of credit, etc. Types of credit are characterized by both general and specific manifestations of credit risks. For example, when lending under an overdraft, there is a risk of an unauthorized overdraft, a risk of violation of the order of payments for an overdraft, a risk of continuity of loan debt under an overdraft, and a number of others. For investment loans, these are specific risks such as the risk of incorrectly determining the client’s lending needs, the risk of incorrectly choosing a loan package, the risk of non-completion of construction, the risk of project obsolescence, the risk of depreciation of collateral, the risk of shortage of raw materials, the lack of a market for finished products, the risk of incorrect calculation of cash flows , the risk of revision of ownership rights to the project, the risk of insolvency of the guarantor, the risk of a low-quality investment memorandum. Therefore, each type of loan is accompanied by different types of risks and the factors that cause them, which requires the development of different methodological support and the use of different methods for managing credit risks.

Factors of a borrower's credit risk are its reputation, including the level of management, operational efficiency, industry affiliation, professionalism of bank employees in assessing the borrower's creditworthiness, capital adequacy, degree of balance sheet liquidity, etc. The borrower's risks may be provoked by the credit institution itself due to the wrong choice of the type of loan and lending conditions.

The study of scientific works and publications of foreign and Russian authors regarding the definition of risk associated with bank liquidity allows us to identify discrepancies already at the conceptual level. Some economists highlight liquidity risk, while others highlight the risk of unbalanced liquidity.

There is no consensus on the essence of these risks. The most traditional approach is to consider liquidity risk, or rather the risk of insufficient liquidity. Some economists associate its essence with the factors of its occurrence (for example, a lack of assets for the timely fulfillment of obligations, the impossibility of quickly converting financial assets into means of payment without losses); others - with the likelihood of losses due to the need to quickly convert financial assets; third - with a change in net income and the market value of shares caused by difficulties in obtaining cash at a reasonable price through the sale of assets or through new borrowings.

Despite all the substantive differences in the above definitions of liquidity risk, the second and third groups of authors have a unified and methodologically sound approach to revealing the essence of this type of risk: the effective and factor side of risk is emphasized.

Factor side of risk. Its isolation is necessary to reveal the essence of risk. It is she who emphasizes the specific nature of each risk, while the effective component determines the nature of the risk in general.

For liquidity risk, this factor lies in the possibility of not fulfilling obligations to depositors and creditors due to the lack of necessary sources or fulfilling them at a loss for oneself.

Internal liquidity risk factors usually include: the quality of assets and liabilities, the degree of imbalance of assets and liabilities in terms of terms, amounts and by individual currencies, the level of bank management, and the image of the bank.

The quality of assets is expressed in low liquidity, which does not allow timely provision of cash inflows.

The quality of liabilities determines the possibility of unexpected, early outflow of deposits, which increases the volume of claims on the bank at any given moment.

The imbalance of assets and liabilities in terms of terms, amounts and by individual currencies does not in all cases pose a threat to liquidity. If the level of this imbalance does not go beyond critical points, and if there is a different direction of deviations in subsequent periods, the liquidity risk is minimal. The level and trend in the imbalance of assets and liabilities determine the bank’s ability to eliminate it. Exceeding critical points and the stability of the nature of deviations create the danger of not being able to cope with the situation that has arisen and adjusting your liquid position.

Thus, summarizing the effective and factor components of liquidity risk, we can formulate its essence as follows: liquidity risk is the risk of incurring losses (losing part of capital) due to the inability or impossibility of the bank to attract additional financial resources in a timely manner and without losses for itself or to sell existing assets to fulfill obligations assumed to creditors and depositors.

As noted above, some economists interpret this risk more broadly, calling it the risk of unbalanced liquidity, including not only the risk of insufficient, but also excessive liquidity.

Thus, in the monograph “Banking: Strategic Leadership”, edited by V. Platonov and M. Higgins, it is noted that the risk of insufficient liquidity is expressed in the inability to fulfill its obligations in a timely manner and this will require the sale of certain assets of the bank on unfavorable terms; the risk of excessive liquidity - loss of income due to an excess of highly liquid assets and, as a consequence, unjustified financing of low-yielding assets using paid resources for the bank.

The factor side of the risk of excess liquidity is also determined by internal and external factors. Their nature is the same for both types of this risk.

Thus, the uniform nature of internal factors is expressed in the fact that excess liquidity, like insufficient liquidity, is a reflection of the bank’s inability to promptly eliminate the discrepancy that has arisen between assets and liabilities of the corresponding periods. The reasons for this situation may be: in case of excessive liquidity, caution or inability to manage the situation, to find areas for development of bank operations; in case of a lack of liquidity - aggressive policy, inability to assess the real situation.

The uniform nature of external factors determines the bank’s inability to assess and take into account the external environment in which it operates.

The reasons causing the risk of unbalanced liquidity generally lie in the unsatisfactory management of the bank, which is unable to properly structure cash flows and ensure their quality.

Thus, the risk of unbalanced liquidity should be understood as the risk of loss of income due to the inability or inability of the bank to adjust its liquid position in a timely manner, i.e. bring into compliance and without loss for yourself the volume of obligations and the sources of their coverage.

Interest rate risk refers to those types of risk that the bank cannot avoid in its activities. Moreover, the responsibility for measuring, analyzing and managing it lies entirely with the management of the credit institution. Supervisory authorities are limited mainly to assessing the effectiveness of the risk management system created in a commercial bank.

The economic literature presents different points of view regarding the concept of interest rate risk. Some authors interpret it as the risk of loss as a result of changes in interest rates. Other authors give a similar definition, considering interest rate risk as the probability of losses in the event of changes in interest rates on financial resources. Still others offer a broader definition, believing, in particular, that interest rate risk is the risk of losses due to unfavorable changes in interest rates in the money market, which finds external expression in a fall in the interest margin, reducing it to zero or a negative value, indicating at the same time for a possible negative impact on the market value of capital.

The Fundamental Principles of Banking Supervision (as set out in the Basel Committee) define interest rate risk as the risk that a bank's financial position may be potentially exposed to an adverse change in interest rates.

Interest rate risk factors. The essence of interest rate risk allows us to identify factors influencing its level.

Interest rate risk factors can be divided into internal and external. In the Russian economy, unlike developed countries, the level of risk is mainly increased by external factors.

These include:

- instability of market conditions in terms of interest rate risk;

- legal regulation of interest rate risk;

- political conditions;

- economic situation in the country;

- competition in the banking services market;

- relationships with partners and clients;

- international events.

Internal interest rate risk factors include:

- lack of a clear bank strategy in the field of interest rate risk management;

- miscalculations in the management of banking operations, leading to the creation of risky positions (the emergence of an imbalance in the structure and maturities of assets and liabilities, incorrect forecasts of changes in the yield curve, etc.);

- lack of a developed program for hedging interest rate risks;

- shortcomings in planning and forecasting the development of the bank;

- personnel errors during operations.

The main problem in practice is the timely monitoring of interest rate risk factors, and this process must be continuous. In accordance with the identified reasons for the occurrence of increased interest rate risk, it is necessary to adjust the risk management system of the bank.

The essence of a bank's loan portfolio can be considered at the categorical and applied levels. In the first aspect, the loan portfolio is the relationship between the bank and its counterparties regarding the return movement of value, which takes the form of credit requirements. In the second aspect, the loan portfolio is a collection of bank assets in the form of loans, discounted bills, interbank loans, deposits and other credit-related claims, classified into quality groups based on certain criteria.

1.2 The concept of loan portfolio quality

The most important indicator of the level of organization of the lending process is the quality of the loan portfolio.

To reveal the content of the quality of the loan portfolio, let us turn to the interpretation of the term “quality”.

Quality is:

1) property or accessory, everything that constitutes the essence of a person or thing;

2) a set of essential features, properties, features that distinguish an object or phenomenon from others and give it certainty;

3) this or that property, a sign that determines the dignity of something.

Consequently, the quality of a phenomenon should show its difference from other phenomena and determine its dignity.

The qualitative difference between the loan portfolio and other portfolios of a commercial bank lies in such essential properties of the loan and credit categories as the return movement of value between the participants in the relationship, as well as the monetary nature of the object of the relationship.

The set of types of operations and money market instruments used, forming a loan portfolio, has features determined by the nature and purpose of the bank’s activities in the financial market. It is known that loan transactions and other credit transactions are characterized by high risk. At the same time, they must meet the goal of the bank's activities - obtaining maximum profit with an acceptable level of liquidity. This leads to such properties of the loan portfolio as credit risk, profitability and liquidity. They also meet the criteria for assessing the advantages and disadvantages of a specific bank loan portfolio, i.e. criteria for assessing its quality. This correspondence is presented in Table 1.

Table 1 - Correspondence between the properties of the loan portfolio and the criteria for assessing its qualities

The quality of a loan portfolio can be understood as a property of its structure that has the ability to provide the maximum level of profitability at an acceptable level of credit risk and balance sheet liquidity.

Let's consider the content of individual criteria for assessing the quality of the loan portfolio.

Degree of credit risk. Credit risk associated with a loan portfolio is the risk of losses that arise as a result of default by a lender or counterparty, which is cumulative in nature. The loan portfolio, as already noted, has segments: loans provided to legal, physical, and financial organizations; factoring debt; issued guarantees, discounted bills, etc.

Assessing the degree of risk of a loan portfolio has the following features. First, the total risk depends on:

- on the degree of credit risk of individual segments of the portfolio, the assessment methods of which have both common features and features associated with the specifics of the segment;

- diversification of the structure of the loan portfolio and its individual segments.

Secondly, to assess the degree of credit risk, a system of indicators must be used, taking into account many aspects that should be taken into account.

Profitability level of the loan portfolio. Since the purpose of the bank’s operation is to obtain maximum profit at an acceptable level of risks, the profitability of the loan portfolio is one of the criteria for assessing its quality. Elements of the loan portfolio can be divided into two groups: income-generating and non-income-producing assets. The last group includes interest-free loans, loans with frozen interest and long overdue interest payments. In foreign practice, in case of long-term overdue debt, interest is waived, since the main thing is to repay the principal debt. In Russian practice, mandatory interest accrual is regulated. The level of profitability of the loan portfolio is determined not only by the level of interest rates on loans provided, but also by the timely payment of interest and the amount of principal.

The profitability of the loan portfolio has a lower and upper limit. The lower limit is determined by the cost of carrying out credit operations (personnel costs, maintaining loan accounts, etc.) plus the interest payable on the resources invested in this portfolio. The upper limit is the level of sufficient margin. The calculation of this indicator follows from the main purpose of the margin - covering the costs of maintaining the bank.

The margin is sufficient = (General banking expenses - Interest paid - Other income) * 100 / Average balance of income-generating assets.

Liquidity level of the loan portfolio. Since the level of liquidity of a bank is determined by the quality of its assets and, above all, the quality of the loan portfolio, it is very important that the loans provided by the bank are repaid within the terms established by the agreements or the bank has the opportunity to sell loans or part of them, due to their quality and profitability. The higher the share of loans classified into the best groups, the higher the bank's liquidity.

The following arguments can be given in favor of using the proposed criteria for assessing the quality of the loan portfolio (degree of credit risk, level of profitability and liquidity). The low risk of elements of a loan portfolio does not mean its high quality: loans of the first quality category, which are provided to first-class borrowers at low interest rates, cannot generate high income. The high liquidity inherent in short-term credit assets also brings low interest income.

Thus, credit risk cannot be the only criterion for the quality of a loan portfolio, since the concept of loan portfolio quality is much broader and is associated with risks of liquidity and loss of profitability. However, the significance of these criteria will vary depending on the conditions, place of operation of the bank, and its strategy.

1.3 Loan portfolio quality management

In managing a loan portfolio, changing the system for managing the maturities of assets and liabilities and, consequently, the difference in interest rates and, ultimately, profitability is of great importance. Each resource source has its own unique characteristics, variability, and reserve requirements. The approach to their management is the method of conversion of financial resources, which considers each source of funds individually.

Management of a bank's loan portfolio is an important element of its credit policy.

Loan portfolio management has several stages:

1) determination of the main classification groups of loans and the risk coefficients assigned to them;

2) assignment of each issued loan to one of the specified groups;

3) clarification of the portfolio structure (shares of various groups in their total amount);

4) assessment of the quality of the portfolio as a whole;

5) identification and analysis of factors that change the structure (quality) of the portfolio;

6) determining the amount of reserves that must be created for each loan issued (except for loans for which a single reserve can be created);

7) determination of the total amount of reserves adequate to the total risk of the portfolio;

8) development of measures aimed at improving the quality of the portfolio.

The key point in managing a bank's loan portfolio is the choice of criterion(s) for assessing the quality of each loan and their entire aggregate.

The need to form a reserve is due to credit risks in the activities of banks. The bank creates a reserve for possible impairment of the loan (credit), i.e. against the possible loss of value of the loan (in whole or in part) due to the realized credit risk associated with this loan. The amount of such impairment is determined as the difference between the balance sheet value of the loan (the outstanding balance of the loan reflected in the bank's accounts at the time of its assessment) and its so-called fair value at the time of assessment (the current market valuation of the loan). In this case, the fair value of the loan must be assessed on an ongoing basis, starting from the moment the loan is issued.

The reserve is formed for a specific loan or for a group (portfolio) of similar loans, i.e. under a number of loans with similar credit risk characteristics, separated for the purpose of creating a reserve.

When forming a reserve, the bank, based on the category of the loan, determines the size of the so-called settlement reserve, i.e. reserve reflecting the amount of its possible financial losses on the loan, which will be recognized as such subject to compliance with the procedure for assessing credit risk factors provided for in the Regulations, but without taking into account the availability and quality of loan collateral. If there is collateral, the size of the required reserve is determined in a slightly different manner.

In order to determine the size of the estimated reserve in connection with the expected effect of credit risk factors, loans (except for loans grouped into homogeneous portfolios) are classified into one of 5 quality categories:

I (highest) quality category (standard loans) - no credit risk (the probability of loan impairment is zero);

Quality category II (non-standard loans) - there is a moderate credit risk (there is a possibility of loan impairment by 1-20%);

III quality category (doubtful loans) - there is a significant credit risk (there is a possibility of loan impairment by 21-50%);

IV quality category (problem loans) - there is a high credit risk (there is a possibility of loan impairment by 51-100%);

V (lowest) quality category (bad loans) - there is no probability of loan repayment, i.e. it will be completely devalued (100%).

This classification must be made by bank employees based on professional judgment, which is very difficult. How, “for example, can you decide whether the probability of financial losses on a given loan is 50 or 51%?” And what will happen if the bank stops at the first number, and the controllers from the Central Bank's technical department stop at the second?

The Bank assesses its credit risks, classifies and evaluates loans, determines the size (amount) of reserves when the grounds provided for in the Regulations arise, but at least once a month (as of the reporting date). He carries out all this work independently (except for the case provided for in Article 72 of the Law “On the Central Bank of the Russian Federation”) on the basis of professional judgments. To do this, he must have the necessary set of internal documents (they were called earlier). Professional judgment must be made based on the results of a comprehensive analysis of the borrower’s activities, taking into account its financial situation, the quality of its debt service on the loan, as well as all information available to the bank about any risks associated with the borrower.

The Central Bank considers the sources of information about the risks associated with the borrower to be the borrower’s title documents, his accounting, tax, statistical and other reporting, additional information provided by him, as well as the media and other sources that the bank determines independently. That is, the bank is legally required to obtain from a variety of sources information necessary and sufficient to form a professional judgment about the size of the estimated reserve. At the same time, he is also obliged to record all such information about each borrower in a special dossier, and this dossier must be available to management bodies, internal control services of the bank, auditors and supervisory authorities.

The bank forms (regulates) the reserve at the time it receives information about the emergence (change) of credit risk and/or the quality of loan collateral. If the financial situation of the borrower changes, the quality of loan servicing changes, as well as if there is other information about the borrower’s risks, the bank is obliged to reclassify the loan and, if there are grounds, clarify the amount of the reserve.

The bank is also, in the manner established by its relevant authorized body (bodies), obliged to regularly document and enter into the borrower’s file new information about him, including a professional judgment about the level of credit risk for the loan, information about the analysis based on the results of which such a judgment was made, a conclusion on the results of assessing the borrower’s financial position, calculating the reserve.

As for the financial position of the borrower, in accordance with the Regulations under consideration, it is assessed according to the method(s) included in the internal bank documents discussed earlier.

The Central Bank document states that the borrower’s financial position is assessed:

How good if a comprehensive analysis of the borrower’s production, financial and economic activities and all other information about it indicate stability of production, positive net assets, profitability and solvency and there are no phenomena (trends) that could negatively affect the financial stability of the borrower in perspective (a significant decrease in the growth rate of production volumes, profitability indicators, a significant increase in accounts payable and/or receivables, etc.);

As average (not better), if an analysis of the borrower’s activities and/or other information about him indicates that there are no direct threats to his current financial position, but there are negative phenomena (trends) that in the foreseeable future (a year or less) can lead to financial difficulties if the borrower does not take measures to improve the situation;

It is bad if the borrower is declared bankrupt or if he is persistently insolvent, as well as if an analysis of the borrower’s activities and/or other information about him indicates threatening negative phenomena (trends), the likely result of which may be his bankruptcy or persistent insolvency of the borrower (losses, a negative value or a significant reduction in net assets, a significant drop in production volumes, a significant increase in accounts payable and/or receivables, etc.).

Regulation No. 254 states that, depending on the quality of debt service by the borrower, loans should be classified into one of three categories: well serviced; average service; poorly maintained.

Debt servicing on a loan can be considered good if:

- payments on principal and interest are made on time and in full;

- there is only a single case of late payments on principal and/or interest during the last 180 calendar days, including:

- for loans provided to legal entities - up to 5 calendar days;

- for loans provided to individuals - up to 30 calendar days.

Debt servicing must be considered unsatisfactory if:

- there are overdue payments on principal and/or interest during the last 180 calendar days:

- for loans granted to legal entities - over 30 days;

- provided to individuals - over 60 days;

- the loan has been restructured and there are overdue payments on the principal and/or interest, and the financial position of the borrower is assessed as poor;

The loan was provided to the borrower directly or indirectly (through third parties) in order to repay a debt under a previously received loan, or the bank directly or indirectly assumed the risk of loss in connection with the provision of money to a borrower whose financial position cannot be assessed as above average, provided that the previously issued loan was classified based on the quality of debt servicing as a loan with average servicing, or if there were overdue payments on the new loan.

Formulated professional judgments about the financial situation of the borrower and the quality of their debt service make it possible, by combining these two criteria, to determine the quality category of each specific loan as presented in Table 2.

Table 2 - Determination of the loan quality category, taking into account the financial situation of the borrower and the quality of debt servicing

Similar documents

Study of the essence, functions and principles of consumer lending. Legal regulation of lending to individuals. Methods for assessing the creditworthiness of individuals. Analysis of the loan portfolio of the Siberian Bank of Sberbank of Russia in terms of lending.

thesis, added 03/26/2013


Credit policy of a commercial bank. Stages of the credit process and their characteristics. Credit risk management methods. Assessing the quality of the bank's loan portfolio. Analysis of credit operations and the structure of the loan portfolio using the example of Sberbank of Russia.

course work, added 02/01/2014


Theoretical aspects of mortgage lending in Russia and abroad. Features of the organization, program and technology of mortgage lending in Russia. Analysis and assessment of the mortgage lending program and the loan portfolio of the Siberian Bank of the Savings Bank of the Russian Federation.

thesis, added 09/11/2010


Economic essence and indicators for assessing the quality of the loan portfolio. Analysis of modern practice of managing the quality of a loan portfolio using the example of JSCB "Investbank". Priority ways to solve problems in the field of quality management of credit investments.

thesis, added 09/26/2010


Analysis of the quality of the loan portfolio and the level of liquidity of Sberbank OJSC in order to assess its position in the financial market. Provision of brokerage and depository services by a credit institution. Priority tasks for working with Sberbank clients for 2011.

course work, added 11/27/2013


Consideration of the essence, criteria of segmentation, risks (credit, liquidity, interest) and quality management of the loan portfolio of a commercial bank, familiarization with the problems of their diversification using the example of the Savings Bank of Russia.

course work, added 04/14/2010


The essence and concept of the loan portfolio of a commercial bank. Characteristics of the activities of Sberbank of Russia OJSC, the bank’s policy and the level of organization of the credit process. The main stages of formation and management of a loan portfolio, analysis of its quality.

course work, added 04/17/2014


The essence and concept of a loan portfolio. Indicators of its quality, methods of managing it and ways to improve it in a modern economy. Brief economic characteristics of Sberbank. Assessment of credit risk management of a commercial bank.

thesis, added 06/04/2013


The concept of creditworthiness, goals and objectives of assessing creditworthiness. Methods for assessing the creditworthiness of legal entities and individuals. Comparison of methods for assessing the borrower's creditworthiness. Characteristics of the activities and credit policy of Sberbank of Russia.

course work, added 01/30/2012


Methods for assessing the creditworthiness of legal entities and individuals. Scoring (score) assessment of creditworthiness and underwriting. Organization of the process of assessing the creditworthiness of borrowers - individuals - by Sberbank of Russia using the example of a mortgage loan.

Discipline: Economy
Kind of work: Thesis
Topic: Optimization of the loan portfolio of a commercial bank

FROM THE FOUNDATIONS OF THE RUSSIAN STATE LIBRARY

Burunanova, Tatyana Danilovna

1. Optimization of the commercial loan portfolio

1.1. Russian State Library

diss.rsl.ru 2003

Burukhanova, Tatyana Danilovna

Optimization of the loan portfolio of a commercial bank [Electronic resource] Dis. ...cand. econ. Sciences: 08.00.13. M. RSL, 2003 (From the collections of the Russian State Library)

Mathematical and instrumental methods of economics

Full text:

http://diss.rsl.ruAiiss/03/0741/030741038.pdf

Text Reproduced from a copy in the RSL collection:

Burukanova, Tatyana Danilovna

Optimization of the loan portfolio of a commercial bank

Moscow 2003

Russian State Library, 2003 (electronic text).

L FINANCIAL ACADEMY

UNDER THE GOVERNMENT OF THE RUSSIAN FEDERATION

Copyrighted as a manuscript by BBK: 65.262.2v641 B91

BURUKHANOVA TATIANA DANILOVNA

OPTIMIZATION OF THE LOAN PORTFOLIO OF A COMMERCIAL BANK

08.00.13 - Mathematical and instrumental methods of economics

Dissertation for the degree of Candidate of Economic Sciences

Scientific director

Doctor of Physical and Mathematical Sciences,

Professor Krase M.S.

Moscow 2003

INTRODUCTION 3

CHAPTER 1. LOAN PORTFOLIO: PRINCIPLES OF FORMATION AND
MANAGEMENT APPROACHES 8

Loan portfolio: place and role in the activities of modern commercial
bank 8
Principles of forming a loan portfolio of a commercial bank 15

1.3. Approaches to optimizing the credit operations management process

commercial bank 26

CHAPTER 2. LOAN PORTFOLIO OPTIMIZATION MODEL
COMMERCIAL BANK 32

2.1. Review of approaches to modeling banking activities 32

2.2. Justification for choosing a mathematical model of the loan portfolio
commercial bank 53

2.3. Determination of the main parameters and criteria for the effectiveness of the model 62

2.4. Construction of an economic and mathematical model of the loan portfolio
commercial bank 68

2.5. Methodology for calculating the base interest rate of placement when forming

interest rate policy of a commercial bank 79

CHAPTER 3. OPTIMIZATION OF THE COMMERCIAL CREDIT PROCESS
BANK: AN INTEGRATED APPROACH 86

Organization of an effective bank lending process 86
Bank loan portfolio assessment 95

3.3. Application of the developed optimization model in solving
practical problems, 101

3.4. Credit risk management in a bank 112

CONCLUSION 118

LITERATURE 121

APPLICATIONS 132

INTRODUCTION

Relevance of the research topic. The credit operation has significant productive power. Credit funds circulate not just as money, they circulate as capital, which presupposes a use of the loan that should inevitably generate in the borrower’s economy the formation of new value, profit, partially ceded to the lender. Credit contributes to the continuity and acceleration of production and circulation of the product, and, consequently, to the development of the entire economy of the region and country.

Given that the refinancing rate is falling, the yield of the securities market is low, and the stock market is unstable, investments and lending to the real sector of the economy are becoming the main sources of income for many banks. At the same time, an increase in lending volumes is accompanied by an increase in the share of overdue debt, which may ultimately affect the liquidity of bank portfolios and lead to a repeat banking crisis. Hence, along with the growth of the lending potential of Russian banks, the problem of effective formation of loan portfolios is obvious.

In modern banking information systems, the means
c| those controlling the bank's lending operations, as a rule, duplicate functions

accounting, in connection with which there is a need to develop and use in the current activities of banks economic and mathematical models that allow managing the bank’s loan portfolio.

| Research on modeling the credit process can be

i conditionally divided into groups:

1) optimization algorithms, among which are tasks,
based on the classical theory of portfolio optimization proposed by G.
Markovich and D. Tobin, which is based on risk assessment

; financial instruments by their volatility (I.E. Amelin) and regulatory

models based on optimizing the distribution of funds with restrictions

mandatory economic standards governing the activities of credit

(* organizations (Z.M. Tsirikhova, I.F. Tsisar);

2) models based on forecasting loan payment flows
portfolio (A.A. Solyankin, A.V. Borodin, M.A. Pomorina, A.I. Ekushov);

3) models for assessing the creditworthiness of borrowers (I.A. Kiseleva, D.A. Parfenov).

Without dwelling on the essence of the listed approaches, we will indicate the main
) problems that persist in managing the bank's loan portfolio. Firstly,

i optimization algorithms based on classical optimization theory

financial portfolios are primarily aimed at investment portfolios (securities portfolios), since assessing credit risk using standard deviation does not seem effective and reliable due to the lack of a historical retrospective of the initial data on loans. Secondly, regulatory models, as a rule, propose to optimize financial portfolios in a static manner and do not take into account the dynamic nature of the bank’s financial flows. And thirdly, the task of modeling the management of credit operations requires the simultaneous solution of issues of forecasting the liquidity of financial flows and the optimal distribution of free funds over time.

The need to develop a holistic, evidence-based approach to

the problem of forming a loan portfolio of a commercial bank and its

^ management determined the choice of topic and task of this dissertation

research.

The purpose of the dissertation research The purpose of the work is to build an economic and mathematical model of the process of forming a loan portfolio of a commercial bank, which makes it possible to dynamically predict the liquidity of financial flows and optimize the process of distributing free funds.

1 In accordance with the given goal, the following were set and resolved in the work:

main objectives of the study:

Analysis of the role and place of the loan portfolio in the activities of a commercial bank;

I analysis of the main problems of formation and management of credit

** portfolio of a commercial bank;

classification of mathematical methods used in
modeling banking activities in order to determine approaches to
modeling the loan portfolio of a commercial bank;

determination of main parameters and performance criteria
loan portfolio;

construction of an economic and mathematical model of the loan portfolio,
allowing it to be used in the real work of credit managers;

The object of the study is the bank's loan portfolio.

The subject of the study is the formation processes and means of modeling the loan portfolio of a commercial bank.

Theoretical and methodological basis of the study. The study is based on applications of the methodology of economic theory, banking, economic process modeling and economic analysis. In the process of working on the dissertation, general scientific research methods were used: observation, comparison, abstraction, formalization.

When solving specific problems, elements of the theory of portfolio optimization, methods of expert assessments, and methods of system analysis were used as research tools.

The information base of the study consisted of laws, regulations, decrees of the Government of the Russian Federation, regulatory documents and orders of the Central Bank of the Russian Federation regulating the lending activities of banks; results of research by scientists of the Financial Academy under the Government of the Russian Federation (O.I. Lavrushin, E.B. Gerasimova, E.S. Dubovik, A.I. Poezdnik, Z.M. Tsirikhova), works of domestic and foreign scientists and specialists in the subject under study region (H.A. Taha, J.F. Sinki, A.A. Pervozvansky, G.B. Kleiner, I.F. Tsisar, B.A. Lagoshi, P.V. Konyukhovsky, A.I. Ekushov, V.A. Tsarkova, M.A. Rogova, F.M. Uzdenova, I.A. LLC "Russian Deposit Bank".

The work was carried out in accordance with paragraph 2.3 of the Passport of specialty 08.00.13 - “Mathematical and instrumental methods of economics”.

The scientific novelty of the research lies in the construction of a concept for managing the loan portfolio of a commercial bank, based on the use of step-by-step dynamic programming methods.

Elements of novelty include the following research results:

It has been proven that optimizing the credit management process
bank operations should be analyzed, first of all, from a methodological and
functional positions corresponding to the management method.

A classification of approaches to modeling banking
activities based on the degree of completeness of coverage of aspects of this
activities.

A two-level subordinate dynamic model has been developed,
allowing you to optimize financial flows in sequence
time intervals and forecast their liquidity; in this hierarchy
the output of the first level model is the input information for
models of the subsequent level, that is, optimization correction is carried out
both in time cycles and in control cycles. This approach, in contrast to
others, allows you to more effectively and substantively optimize the process
distribution of the bank's free funds into loans throughout the forecast
period, including with the participation of decision makers.

A methodology for calculating the base interest rate of placement is proposed,
allowing you to specify the calculation of the bank’s minimum necessary costs
on placing available funds on loans; correction provided
interest rate over the entire forecast period of loan portfolio optimization.

The practical significance of the work lies in the fact that its provisions and conclusions are oriented towards use in solving tactical and strategic problems within the framework of planning the credit activities of a commercial bank.

The following have independent practical significance:

tested and implemented in the work of Moscow commercial banks: TANDEMBANK LLC and Russian Deposit Bank LLC.

The provisions of the work were discussed at the international scientific and practical conference “Institutional problems of Russian reforms in conditions of macroeconomic instability” (Irkutsk, Irkutsk State Economic Academy, December 14, 2001) and the Fourth All-Russian symposium “Strategic planning and development of enterprises” (Moscow, Central Economic Mathematical Institute of the Russian Academy of Sciences, April 15-17, 2003).

Publications. Eight papers with a total volume of 2.6 pp have been published on the topic of the dissertation research. All works are original.

Structure of the dissertation research. The structure of the work is determined by the purpose and assigned tasks. The dissertation research consists of an introduction, three chapters, a conclusion and a list of references.

CHAPTER 1. LOAN PORTFOLIO: PRINCIPLES OF FORMATION AND APPROACHES TO MANAGEMENT

1.1. Loan portfolio: place and role in the activities of a commercial bank

With the development of market relations in the structure of the Russian economy, there has been a significant expansion of the banking sector. Since 1991, the formation of the banking system of the Russian Federation began, more than 2,500 commercial banks have appeared. However, by 1999, as a consequence of the August 1998 crisis, due to the weakness of management and banking supervisors, many of them were unable to fulfill their obligations and were deprived of their licenses. The banking crisis of the summer of 1998 proved the low efficiency of previous methods of banking supervision and the insufficiency of indicators and standards established by the Bank of Russia for judging the reliability of a bank.

The need for competent, scientifically based management of bank resources has long been generally recognized in economically developed Western countries. This is reflected in the works of Joseph F. Sinkey Jr. translated into Russian. and Peter S. Rose, which became available to Russian economists.

The bank's resources represent the so-called banking portfolio. A banking portfolio is an interconnected set of assets and liabilities of a bank, where liabilities characterize the sources of formation of the resource base of a credit institution, and assets reflect the ways in which these resources are allocated. Passive operations allow banks to attract funds already in circulation. The formation of new resources of the banking system is carried out through active banking operations that generate income.

The economic content of active operations consists in the expedient placement of the bank’s own and borrowed funds in order to obtain maximum profitability. The liquidity, profitability, financial reliability and stability of the bank as a whole depend on the quality placement of the bank’s funds and the state of the bank’s active operations.

The assets of a commercial bank can be divided into four categories: cash and cash equivalents; investment papers; loans; buildings and equipment. The structure of assets is largely determined by the peculiarities of banking legislation and accounting, as well as under the influence of the external environment. However, there are general trends in the composition and structure of assets:

Credit operations. Their share ranges from 19.90 to 83.25%
Investments in securities (from 2.15 to 23.87%).
Cash assets (from 0.2 to 12.94%)
The share of other assets is determined by accounting features and includes
a wide range of operations from investments in fixed assets (buildings and structures) to
various bank settlement operations (from 2 to 78%).

Since cash assets and investments in buildings and structures are not profitable operations (they pursue their goal: cash is a highly liquid type of placement and is required for cash transactions; buildings and structures are capital investments), then loans and investments in valuable securities are the main profitable operations of a commercial bank.

Until August 1998, the policy of allocating free resources in many banks was characterized mainly by speculative operations in the highly profitable government securities market, such as GKOs (state treasury obligations), OGFZ (state federal loan bonds) and the foreign exchange market. Banking services and products were often developed in order to ensure an increase in the resource base, costs were minimal and were many times covered by the profits received

from speculative transactions. Restructuring of government securities,
default, subsequent banking crisis and deterioration
general economic situation led to a drop in profits received
Russian banks. The largest banks were the first to go bankrupt
* - leading players in the government securities market. Basically it was

banks in Moscow and the Central region of Russia.

Typically, banks with small assets make fewer loans and own

i a larger share of securities than large banks. Moreover, they have a higher share

Income assets. In terms of liabilities, small banks have less

Money Market Obligations. Therefore, due to the characteristics of their

portfolios, small banks have higher net interest margins and lower
loan losses. As the bank's size increases, the portfolio structure also changes.
Large banks have (as a percentage of average assets) more loans, other
assets, transactions with funds from federal funds, monetary liabilities
“market and foreign deposits, but less income-generating assets, securities,

demand deposits and short-term deposits. Hence their portfolios

are riskier and generate lower net interest margins.

Most banks have loan portfolios...

Pick up file

The issues of structural analysis of the loan portfolio and its diversification are relevant for the Russian banking system. According to foreign analysts, the vulnerability of the Russian banking system is also increasing due to the high concentration of credit risks. This is due not only to the low transparency of borrowers, but also to the persistent structural imbalance of the economy, where the fuel and energy sector accounts for up to 22% of GDP. A fall in oil prices, and at the same time a decrease in financial flows into the country, can quickly destabilize the financial system. Therefore, not only the level of credit activity itself is important for Russia, but also its sectoral distribution. Lending to medium and small enterprises engaged in processing products that increase added value is the basis for improving and strengthening the banking system.

Another vulnerability factor is the concentration of lending activities of many banks on a small number of borrowers. This is due not only to the strong energy tilt of the domestic economy, but also to its existing historical structure, when many banks arose under holding companies to serve them. In conditions where lending is a high-risk business, limiting it to family ties is a very comfortable situation for banks. However, this practice also has a downside, since the diversification of the loan portfolio is sharply narrowed. If a holding starts to falter, then first of all industrial assets are saved, sometimes even at the expense of banks.

As the rating agency Standard & Poor's notes, the concentration of credit investments of Russian banks is dangerously high. The 10 largest loans issued by banks that have received ratings from the agency account for 40% of their total loan portfolios. This is almost 2 times the total capital of these credit institutions. According to world practice, this is a high figure. As of June 30, 2003, MDM Bank's loan portfolio was poorly diversified: 50% of its volume (140% of consolidated equity capital) was accounted for by the 10 largest borrowers. borrowers is becoming an increasingly serious risk factor for MDM Bank: as of June 30, 2003, the share of loans to related borrowers in the total debt of the MDM Financial Group amounted to 17.3% versus 6% in 2001. In CB "European Trust Bank" at the end of 2002, the ten largest borrowers accounted for approximately 60% of the total loan debt, in Petrocommerce Bank - 20% of the loan portfolio, in Gazprombank - 58% as of September 30, 2003, against 69% at the end of 2002 .

It is clear that this situation cannot last long. There is already a tendency to replace large borrowers with smaller ones. This phenomenon can be considered generally positive, since the range of banking clientele is expanding and the amplitude of diversification of credit policy is increasing.

However, at the initial stage of this process, when there is little information about new borrowers, risks can increase significantly.

The main purpose of structural analysis is to assess the concentration of credit investments, develop ways to form a balanced portfolio (risk - profitability - liquidity), as well as draw up and use quantitative rules in the bank's credit policy.

The total loan portfolio can be divided into so-called sectors, which include loans belonging to one or another group, depending on the classification criterion. This will make it possible to consider separately the different types of loan portfolios that make up the total loan portfolio.

Depending on the criterion used for classifying the loans included in it, the loan portfolio can also be classified by counterparties, by type of currency, by residence, by type of collateral, by industry, by issuance period, and by timely repayment.

Each segment of credit investments has a certain level of credit risk. Therefore, determining the share that each segment should occupy is extremely important for the bank. The establishment of lending limits is intended to control the formation of the loan portfolio.

Before setting lending limits, it is necessary to identify the main risk areas:

Individual borrowers:

Excessive concentration on one borrower in the event of his bankruptcy (insolvency) or failure to comply with the terms of the loan agreement due to other reasons may put the bank itself at risk of bankruptcy;

If unexpected problems arise with large borrowers, it is very difficult to change the situation.

Groups of related borrowers:

Same as in the previous case;

Financial problems only in some cases lead to an irreversible crisis in the solvency of the entire group.

Industries and sub-sectors:

Cyclical or systematic structural weaknesses in an industry can cause all but the strongest few companies to fail;

An industry structural crisis affects not only the solvency of the company, but also partly the quality of collateral as a source of debt repayment (for example, if, when lending to oil companies, commodity reserves (oil) are accepted as collateral, at the time of crisis in the industry there may be a collapse in oil prices, which will reduce quality of provision). Business segments:

Economic events can cause a crisis in an entire banking business, such as the suspension of mortgage lending due to a market crash.

Products and services (for example, seasonal, term, consumer loans):

The profitability of an individual banking product is usually determined by a combination of factors, which leads to cyclical changes in bank performance indicators.

A bank's excessive concentration on any one product or service can lead to cyclical swings in profitability.

Let us dwell in more detail on the industry limit, since this is one of the most frequently used limits in the practice of banks. Its significance is determined by the fact that the credit risk associated with a creditworthy firm in a healthy industry is significantly lower than the risk associated with lending to a similar firm in a crisis industry.

Borrowers do not operate completely independently or in a vacuum. Their activities are not entirely the result of their own management capabilities, but are determined by a number of external factors (economic, political, social, etc.). In order to separate risks associated solely with the management of the borrower from external factors, we can attempt to identify these elements of risk as specifically related to the borrower's industry. Knowledge and understanding of industry risks greatly assists in assessing the risk associated with an individual borrower.

Industry risk is directly related to the degree of variability in the industry's performance, economically and financially, in an absolute sense and in comparison to other industries. The greater the volatility of the industry, the greater the degree of risk. Also for analysis purposes, it is necessary to take into account the performance of alternative industries over a given period of time, differences between industries, consistency of results within an industry (whether borrowers within the same industry achieved the same results over the same period of time or there is wide variation in results).

One of the concepts used in measuring industry risk (as well as company risk) is systematic risk, i.e. the level of fluctuation, or deviation, in the performance of an industry relative to the performance of the market or the overall economy. This type of risk, denoted in statistical analysis by the Greek letter beta, can be determined for each industry by relating industry data to one or more market variables. Obviously, this process requires an extensive and reliable database collected over a significant period of time. An industry with a beta of 1 will have a volatility equal to that of the market, while a less volatile industry will perform less than 1 and a more volatile industry will perform greater than 1. Obviously, the higher the beta, the higher the risk associated with the market. this industry.

The value of beta for a given industry will change over time and, in particular, over the course of the business cycle. However, recent studies in the West have shown relatively stable rates over the past decade.

You can also consider special factors related to the industry in which the company being evaluated operates. Two examples of such factors would be the stage of the industry's life cycle and its competitive structure.

All of the above factors will affect the company's ability to manipulate sales volumes and regulate profit margins, its viability. Obviously, as in almost all situations affecting the existence of a company, the above conditions are subject to sudden and unexpected changes. Thus, the degree of industry risk involving borrowers and lenders is not static and deserves continued attention.

The goal of establishing industry-specific lending limits is to create a diversified portfolio containing a large number of assets of comparable value. The degree of diversification of a portfolio is understood as the presence of negative correlations between loans, or at least their independence from each other, which helps reduce the risk of non-repayment.

Let us determine the main ways to ensure sufficient diversification of the loan portfolio based on industry limits:

Diversification of industry segments of the loan part of the loan portfolio through the direct establishment of limits for all borrowers in a given industry in absolute amount or by share in the segment of the bank’s loan portfolio. The concentration of credit risk on a group of borrowers of one industry in the event of their bankruptcy under the influence of external industry factors can have a great negative impact on the bank, even leading to bankruptcy;

Diversification of the industry segment of the loan portfolio by maturity is of particular importance, since interest rates on loans of different maturities are subject to different sizes of fluctuations, therefore the level of profitability of the loan segment of the loan portfolio, as well as the degree of liquidity, significantly depends on the loan term. The implementation of this aspect of managing the risk of non-payment of a loan is carried out in line with the credit policy pursued by the bank. Thus, if the bank is focused on long-term mortgage loans, it is reasonable to include short-term loans in the loan portfolio that will balance its structure;

Credit rationing, which involves the use of different credit instruments within the industry limit: flexible or rigid lending limits, different types of interest rates, differentiation of individual lending limits for individual borrowers in accordance with their financial situation, restrictions on the credit services provided.

Thus, industry segments of the loan part of the loan portfolio must be associated with various areas of the loan business, so that a change in the situation in one sector of the economy does not lead to a decrease in the quality of a significant part of the loan portfolio and an increase in the degree of credit risk.

But there is also a downside to portfolio “diversity”: excessive diversification creates certain difficulties in managing loan operations (it is necessary to have a sufficiently large number of specialists in different fields) and can cause bank bankruptcy.

The inattention of most Russian banks to the structure of the loan portfolio, partly explained by the lack of practice in applying rather complex methods for objectively assessing the quality of the loan portfolio and the reluctance to spend funds on the implementation of such advanced methods, has led to a high concentration of credit risk by industry and collateral in the portfolios of Russian banks.

To restore the real sector of the economy, lending growth is necessary, for which at this stage banks need to change both business processes and methods for assessing credit risk at the transaction and portfolio levels. Economic growth is also necessary for the normal functioning of the banks themselves.

Debt restructuring is one of the ways to improve the quality of the loan portfolio at OJSC JSCB ROSBANK.

It should be noted that the widespread restructuring of loans is a characteristic and significant feature of the present time. The desire to “protect oneself” has given rise to the requirement for additional collateral for existing loans and stricter requirements for collateral when issuing new ones, although many banks admit that due to the collection of collateral, with a certain proportion of borrower defaults in the portfolio, losses may not so much decrease as grow.

The restructuring of loans at OJSC JSCB ROSBANK will lead to a change in the lending process, shifting the emphasis and time costs from issuing new loans to assessing current loans and collateral work. Given the observed volumes of restructuring, methods are needed that would allow us to assess what benefits a particular decision will bring to the bank. At the same time, by benefit we also mean minimizing losses, that is, balancing profitability and risk. First, you need to determine what indicators of the borrower allow you to talk about restructuring. You also need to take into account the fact that, having received collateral, the bank must either manage non-core assets or sell them, and in the current conditions at a price that does not reflect the real value, and often does not cover the bank’s losses. Of course, to clear the balance sheet of problem corporate loans and (or) reduce reserves for possible loan losses, you can, for example, make an assignment.

It must also be remembered that now there is fierce competition between banks for every potential good borrower, and the Western financing market is opening up for the highest quality borrowers. Therefore, JSCB ROSBANK needs to change its approach to organizing the credit process from the point of view of assessing credit risks. The traditional credit process (Figure 1), used at OJSC JSCB ROSBANK, involves the participation of risk managers at several stages of the loan life cycle, without, however, creating a management chain.

Figure 1 – Traditional functions of working with credit

In Figure 1, functions that require the participation of risk management in the credit process are marked in gray. The assessment of the creditworthiness of a corporate borrower is usually carried out separately by credit specialists and risk managers. Financial and non-financial characteristics are analyzed, and the forecast cash flow is calculated. Credit and risk managers formulate their conclusions. Further in the bank, the risk management division participates in the development of methods for assessing the credit risk of borrowers in the process of using a loan - monitoring methods. Risk managers also take part in working with problem debt, taking into account that when restructuring as part of the process of working with problem loans, it is necessary to assess the credit risk of a transaction that is already obviously of increased risk. The traditional process does not involve a portfolio manager who can influence risk taking on individual borrowers. Therefore, it is necessary to introduce a portfolio analyst into OJSC JSCB ROSBANK, whose tasks are to analyze various indicators of the loan portfolio, and if its quality is unsatisfactory (increased risks, low liquidity), to develop recommendations for changing the portfolio.

Active credit management forms a continuous chain of management, focusing not on the issuance or non-issuance of a loan, but on the allocation of capital, that is, on such an allocation of bank resources into assets that meets the requirements for the profitability of the loan portfolio and its risk, including liquidity risk. Then the scheme for active credit risk management will look like this (Figure 2).

Active management of the credit risk of corporate borrowers assumes that the placement of funds is approved if not only the borrower’s creditworthiness meets the requirements of the credit policy, but the requirements for the quality of the loan portfolio are met when placing a loan in it. The quality of the loan portfolio is determined by the optimal ratio of its risk and profitability. Selection of loan parameters (amount, share of the borrower's investment in a project or fixed assets, loan term, deferment, payment schedule) is an integral part of the active management of credit activities. Setting the rate based on risk allows you to reward less risky borrowers.

Figure 2 – Active credit risk management

Optimizing the structure of the loan portfolio, that is, determining its optimal parameters by industry, loan terms and other factors, and purposefully creating the structure the bank needs, is a relatively new direction, especially for Russian banks and risk managers. The essence of portfolio optimization is theoretically no different from that in the theory of Markowitz, who laid the foundation not only for the theory of portfolio investment, but also for diversification. However, one cannot simply take and apply Markowitz's theory of optimization of a securities portfolio, in which financial instruments have a market value and are freely purchased and sold. First, loans to specific borrowers do not have a specific market price, unlike securities listed on an exchange. Secondly, the bank cannot freely “purchase” loans in a certain amount. The loan amount is limited to the borrower's needs to maintain or develop the business. The formulated restrictions lead to the need to modify Markowitz’s optimal portfolio theory in order to make it applicable for the active management of credit risk in OJSC JSCB ROSBANK.

Such a tool allows the portfolio manager to classify all possible changes in the structure of the loan portfolio (Figure 3) into effective ones, those located within the sector between points A and B, and ineffective changes. Each of the selected strategies can be calculated. Thus, a strategy for minimizing risk while maintaining profitability requires one sectoral structure of the loan portfolio, and a strategy for maximizing profitability while maintaining the level of risk requires another.

Figure 3 - Efficient Portfolio Frontier

Since the bank is limited in its choice of clients from different industries, the amount of change in the volume of loans issued by industry can also be set as a limitation. The result of such optimization carried out for OJSC JSCB ROSBANK is presented in Figure 4.

Figure 4 – Results of industry optimization of the loan portfolio for 2010.

In the figure we see that in order to optimize the loan portfolio by economic sector, it is necessary to increase the issuance of loans to agriculture, since it is the most liquid for the bank. It is also necessary to reduce the issuance of loans for wholesale and retail trade. And all other sectors are within normal limits, which indicates the effective work of bank employees in analyzing the bank’s loan portfolio.

Thus, the methodology allows you to calculate and set limits (lower and upper) for the shares of funds in the portfolio that need to be placed in loans by industry, and this can be done taking into account the specifics of the economy. Deviation from the given optimal structure of capital allocation will lead to the removal of the point characterizing the loan portfolio in terms of profitability and risk from the effective boundary.

- 674.00 Kb

Based on the criteria of table 2.11. you can determine the loan quality rating based on the scores:

1.Best 163-140

2.High quality 139-118

3.Satisfactory 117-85

4.Limit 84-65

5. Worse than the limit 64 and below

The scoring system allows you to determine the structure of the loan portfolio for the reporting period and compare it with previous periods and, based on this, identify a positive or negative trend.

A positive trend is an increase in the share of the best loans and high quality loans.

A negative trend is an increase in the share of loans at the maximum level and worse than the maximum level.

III. Optimization of the structure and quality of the bank’s loan portfolio

3.1.Ways to achieve an optimal bank loan portfolio

To achieve the optimal structure and quality of the bank's loan portfolio, it is necessary to conduct a thorough analysis of the client's creditworthiness, as well as implement the correct policy of diversification and hedging of loans and skillfully manage the loan portfolio.

Even before the start of lending, the bank collects the necessary data about the borrower, in other words, compiles a “credit dossier”, which contains the following documents:

• application or application for a loan;
• annual balance sheet with all appendices thereto;
• balance sheet as of the last quarterly date;
• Profits and Losses Report;
• copies of agreements (contracts) or other documents in confirmation of the transaction being financed when lending on loan accounts;
• data on the expected receipt and use of foreign currency (when issuing a loan in foreign currency).

From legal entities whose current (settlement) accounts are opened in other banks, the following must additionally be received:

• copies of constituent documents (charter, constituent agreement), certified by a notary, or by a higher authority, or by the body that carried out the registration;
• a copy of the document on its registration (re-registration), certified by a notary or a registering authority;
• a card with sample signatures, certified by a notary or a higher authority, and an imprint of its seal.

Non-residents submit a copy of a document confirming the status of a foreign enterprise, a copy of the charter (regulations, arguments, etc.), certified in the prescribed manner, with a translation into the Belarusian (Russian) language.

When issuing long-term loans, with the exception of loans for the acquisition of objects for their subsequent transfer to financial lease (leasing), in addition to the specified documents, a business plan is submitted, including calculation of the economic efficiency and payback of the loaned project.

The list of documents to be submitted for obtaining a loan by an individual entrepreneur and an individual is determined by the bank independently.

Based on the submitted documents and other information, bank specialists study the legal capacity of the borrower, his creditworthiness and reputation in the business world.

The absence of the above documents or their formal completion is an indicator of a low level of lending work in the bank, and accordingly increases the riskiness of the loan transaction.

One of the main ways to reduce the risk of loan default is to carefully select potential borrowers. There are many methods for analyzing the client’s financial situation and his reliability in terms of timely repayment of debt to the bank. In the practice of American banks, the “five C rule” is used, where the criteria for selecting clients are indicated by words starting with the letter “C”:

• character (character of the borrower);
• capacity (financial capabilities);
• сapital (capital, property);
• collateral (collateral);
• conditions (general economic conditions).

The “character” of the borrower refers to his reputation, degree of responsibility, readiness and desire to repay the debt. The bank seeks, first of all, to find out how the borrower (company or individual) treated its obligations in the past, whether he had delays in repaying loans, and what his status is in the business world. The bank strives to obtain a psychological portrait of the client, using a personal interview with him, a dossier from his personal archive, consultations with other banks and firms and other available information.

The financial capabilities of the borrower and his ability to repay the loan are determined through a thorough analysis of his income and expenses and the prospects for changing them in the future. In principle, the borrower of the bank has three sources of funds to repay the loan:

– current cash flow;

– sale of assets;

– other sources of financing (including borrowings on the money market).

The dynamics of the enterprise's receivables and changes in its inventory are critical for loan repayment. Most often, these items are associated with difficulties in repaying the loan.

Returning to the “five C rule”, we further note that the bank also pays great attention to other factors, namely the company’s share capital, its structure, the relationship with other items of assets and liabilities, as well as the security of the loan, its sufficiency, the quality and degree of realizability of the collateral in case of non-repayment of the loan.

Finally, when considering an application for a loan, the general conditions that determine the business climate in the country and influence the position of both the bank and the borrower are taken into account: the state of the economic environment, the presence of competition from other producers of similar goods, taxes, prices for raw materials, etc. .d.

One of the goals of bank loan officers is to express in numbers (quantify) the specified criteria in relation to each specific case. Based on this, an informed decision will be made regarding the client’s creditworthiness, the advisability of issuing a loan to him, the price and non-price conditions of this loan, etc.

Assessment of creditworthiness is the most important and complex stage in the credit process, an indicator of the professionalism of bank employees, since it is from its results that one can obtain the most complete information both about the borrower and the possible prospects for timely repayment of the requested loan. A creditworthiness assessment will identify insolvent clients whose lending could increase the risk of the loan portfolio.

This procedure should not be formal in nature and consist only in the technically correct calculation of a certain number of indicators according to the balance sheet data as of the last date, although the calculation of certain indicators in this procedure is mandatory.

When determining creditworthiness, the financial condition of the borrower must be considered for a period of at least a year, especially if we are talking about a client with a current account in another bank. In this case, the results of the calculations must be commented on according to their economic meaning and reflected in the conclusion of the loan application.

When making a decision to issue a loan, the bank must remove all doubts about the correctness, integrity and honesty of the client’s intentions, which is achieved by studying the character and individual qualities of its management, on the one hand, and the quality of the loan, on the other hand. The bank should not provide loans that are too risky, even if they, in the case of a successful transaction, involve the bank receiving a large profit, since it does not have the right to risk the funds of its depositors.

As a rule, a loan is issued in a non-cash form for the purposes stipulated by the loan agreement, by paying from loan accounts payment demands of the seller (supplier) accepted by the borrower or payment instructions of the borrower, issued in accordance with the legislation of the Republic of Belarus, for goods actually received or shipped or completed work, including the amount of value added tax on paid values ​​and the cost of returnable packaging. In economically justified cases, a loan can be directed to the current (settlement) account of the borrower (for the restoration of costs during construction on an economic basis, for the payment of wages, etc.), credited in accordance with the procedure established by law to the current accounts of his employees, or issued in cash (for the payment of wages , purchase from citizens of agricultural and other products, the purchase of which is permitted for cash by the legislation of the Republic of Belarus. In some cases, when an agreement on the assignment of a claim or transfer of a debt is concluded between the seller (supplier) and another legal entity, it is possible to send funds when making a payment. loan account directly to another person. The Bank is not responsible for the correctness of the conclusion of these agreements.

With the permission of the head of the bank or other authorized person, settlements may be made at the expense of the loan in the form of advance and (or) preliminary payments, if, in accordance with the concluded agreements (contracts), the fulfillment of obligations by residents is provided for within no more than 30 days after their payment or other terms, provided for by agreements (contracts) or legislation of the Republic of Belarus, and by non-residents - within the terms and conditions determined by the legislation of the Republic of Belarus. Advance and (or) preliminary payments in foreign currency under the terms of settlements under contracts to one non-resident in payment for imported goods (work, services) in an amount equivalent to 100 thousand US dollars and above, at the expense of a loan, are made if the payer has a guarantee from a foreign bank for the return of an advance or execution of a contract. In this case, the foreign guarantor bank must meet the minimum requirements for non-resident banks in which banks of the Republic of Belarus can place funds. At the same time, the bank must ensure subsequent control over the marketability of the completed payment.

The risk of a loan portfolio, like the risk of a specific transaction, is characterized by two quantities: the amount of credit risk and the degree of risk. If the amount can be calculated quite simply - by adding the total amounts of credit risk of each credit transaction, then the degree of risk is not just a weighted average. It depends both on the probability of losses for each specific transaction, and on the degree of diversification of the portfolio itself. Therefore, to reduce portfolio credit risk, you can:

• influence each specific transaction;
• pursue a policy of diversification and hedging.

Having assessed the credit risk and considered ways to minimize it, the bank decides whether to accept the credit risk or reject the transaction. However, credit risk is not a constant value. Under the influence of various factors, its size may change and not always for the better. Therefore, the bank must conduct credit monitoring.

The purpose of credit monitoring is to monitor changes in credit risk and determine what actions should be taken if problems arise. Once a loan is issued, the bank must consistently monitor its quality to ensure that it does not change for the worse. The key point of this procedure is maintaining close contacts with the client to obtain operational information and its timely analysis.

Monitoring should include the following procedures:

• credit assessment;
• ranking of loans.

Analytical techniques used in credit analysis are also used in monitoring to track the dynamics of indicators and analyze creditworthiness. Liquidity, financial structure, profitability should be the subject of constant analysis.

Loan ranking is a method of systematically and objectively classifying a loan portfolio according to risk characteristics.

To manage the monitoring process, it is necessary to develop and implement a risk classification system to rank loans by their quality at least once a quarter. Such a ranking system will help identify problem areas, as well as plan, coordinate and implement other procedures aimed at protecting the interests of the bank in the event of a deterioration in the creditworthiness of the borrower.

The most important factors in accordance with which loans are ranked are the state of reporting, information about the state of affairs and accounts of the client, relationships with clients, and the availability of collateral.

Minor problems identified during monitoring may be subject to additional approvals from the management of the borrower, while the identification of serious problems should entail the transfer of the loan to the department for working with problem loans.

Credit monitoring includes:

• analysis of the financial and economic activities of the borrower. The analysis is carried out in the Passport of the main indicators of financial and economic activity and assessment of the client’s creditworthiness (quarterly);
• control over the timely implementation by the borrower of payments to repay the principal debt and pay accrued interest;
• control over the intended use of the loan;
• control over the safety of property pledged;
• daily monitoring of the movement of funds in the borrower’s current account and the presence of unsatisfied claims against him.

The optimization of the loan portfolio is influenced by the bank’s corrective actions aimed at minimizing credit risk, which include:

• Negotiations on loan restructuring - changing the terms of debt repayment.
• Involvement of consultants (on technical, marketing or financial issues).
• Sale of assets.
• Obtaining additional collateral.
• Providing a deferment (extension) with the condition of careful monitoring of the activities of the borrower (from holding regular meetings and obtaining accurate financial information to the appointment of bank observers for loan repayment).

Description of work

The subject of the study is the bank's loan portfolio by month and quarter for 2002.
The main objectives of our research are:
reveal the concept of a bank's loan portfolio;
determine what is the basis for the formation of a loan portfolio, as well as the characteristics of loan classification;
reveal the content of the methodology for analyzing the bank’s loan portfolio;

The content of the work

Introduction……….………………………………………………………………………………...4
I. LOAN PORTFOLIO AS A COMPONENT PART OF THE BANK’S CREDIT POLICY.…………………………………………...6
1.1. Credit policy of a commercial bank………………………..6
1.2. Signs of loan classification……………………………..12
1.3. The degree of credit risk as the most important criterion in determining the quality of the loan portfolio……....……………………………..23
II. Analysis and assessment of the quality of the bank’s loan portfolio……...…………………………………………………………………………………29
2.1. Analysis of the bank’s loan portfolio……………........................….29
2.2. Bank loan portfolio management…………………………44
2.3. Methods for assessing a loan portfolio in global banking practice………………………..………………………………………………………48
III. Optimization of the structure and quality of the bank’s loan portfolio………………………………………………………………………………..51
3.1.Ways to achieve an optimal loan portfolio
bank …………………………………………………………………………………...…51
3.2.The bank’s work with problem loans………………………..…66
Conclusion……………………………………………………………………………………73
List of sources used……..………