What is credit risk?
credit risk

Money given by banks to people in need of cash, on the condition that it is paid within a specified time, is called a loan. credit risk

Credit is a banking service that helps people buy the products they want or allows people to own a house or car, and it is the service that impresses customers the most at banks. Thanks to this service of banks, individuals can relieve their cash flow when they are stuck in cash. The high demand of the people for this loan service provided by the banks has also paved the way for the growth of the banking sector. However, the fact is that the demand for credit and credit is so high that the concept of credit risk is exposed.

Credit risk is the possibility that the principal and/or interest of a loan used by individuals may not be paid by the debtor. In this way the banks are incurring losses. The occurrence of this position and the realization of the specified risk probability is called a “default”. In such cases, both the capital requirements of banks increase and the possibility of lending to newcomers becomes less. This is a very negative situation for the banks. For example, if an operator requests a loan to ensure the continuity of its business and becomes insolvent, the bank’s inability to pay back the loan loan taken from the bank will seriously harm the bank, and it will result in the bank’s loss. will affect the record. However, thanks to information systems created jointly by banks, it is possible to access financial records and credit ratings of individuals.

Why is Credit Risk Important for Banks?

Thanks to credit risk assessment and credit rating of individuals, all banks can easily access the financial history of their customers and see whether individuals have paid their loan debts regularly. In this way, banks can reduce the risk of non-payment of loans. An individual’s credit risk is determined by the amount of credit he has previously taken from banks, payment plans, credit cards used by him, the last time he applied for a loan, and his income and expenditure status. Is. According to these credit risk scores, individuals can establish relationships with banks and take loans. However, if the person who wants to access the loan from the bank, has not paid his previous loans on time, has low credit rating, delays the payment of his credit card, if he does not pay the installments of that amount. If he cannot meet the salary of the one he wants to withdraw, he may not be able to avail the credit services of the banks. Because banks want to protect themselves by giving loans to people. They provide this assurance by evaluating the credit rating and credit risk of individuals. If people deposit their loan on time or if they have closed their loan loan in one go, they can easily access loan from banks. The more credits and credit cards people have used in the past, and the more regular payments they make, the more likely they are to take out large amounts of credit in the future. If people deposit their loan on time or if they have closed their loan loan in one go, they can easily access loan from banks. The more credits and credit cards people have used in the past, and the more regular payments they make, the more likely they are to take out large amounts of credit in the future. If people deposit their loan on time or if they have closed their loan loan in one go, they can easily access loan from banks. The more credits and credit cards people have used in the past, and the more regular payments they make, the more likely they are to take out large amounts of credit in the future.

Credit Risk Management

credit risk management; It is subject to the authority and appraisal of the bank which provides the loan to the individual. In the loan allocation process, the banks take the decision of availing the loan after appraisal as per their decision procedures. Once the loan is granted, the payment order and refund is followed by the system. Banks allocate the required reserves from their equity in return for the loans given by them. Also, banks can provide loans at fixed rates from their own resources. Loans not repaid on time will lower your credit rating and may result in significant processes like legal proceedings and enforcement proceedings within the banks’ regulations. For this reason, regular payments are a risk that must be carefully managed for both banks and credit users.

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