MODERN APPROACHES TO CREDIT RISK MANAGEMENT: THEORETICAL FOUNDATIONS AND PRACTICAL TOOLS
Abstract
The article examines modern approaches to credit risk management in banking, focusing on theoretical tasks and practical tools. The methodological aspects of assessing the effectiveness of credit risk management, including the processes of identification, assessment, control, monitoring and minimisation of risks, are considered. The principles that ensure that the bank receives appropriate remuneration for taking risks and limiting them are analysed. Based on the latest research, modern methods such as stochastic planning, robust optimisation, simulation modelling and heuristic algorithms are highlighted. The article emphasises the importance of an integrated approach to risk management that takes into account the interdependence between other types of banking risks and the need to adapt to changing environmental conditions. The author assesses the normative values of credit risk set by the NBU and studies their role in preventing increased risk concentration in the banking system of Ukraine. The influence of asset quality on the sustainability of banks is studied, in particular in the context of a large number of problem assets on the balance sheet. The article examines the impact of asset quality on the sustainability of banks, in particular in the context of a large number of problem assets on the balance sheet. The article analyses a systemic approach to addressing the problem of asset quality, focusing on the growth of overdue debt and the need to increase provisions for credit risk. Based on the data for the period 2019-2023, the dynamics of granted loans and the share of overdue debt in the total amount of loans are studied. It is noted that the volume of loans to customers decreased in 2020 due to economic difficulties associated with the COVID-19 pandemic, but recovered in 2021. The volume of non-performing loans decreased from 2019 to 2021, but increased again in 2022 due to new economic challenges. Provisions for banks' active operations decreased from 2019 to 2021, but increased in 2022, correlating with the increase in NPLs. The share of overdue loans also declined until 2021, but increased in 2022 and 2023. Credit risk management involves continuous monitoring and optimisation of the loan portfolio, which allows for more efficient risk management through the formation of a secondary loan market.
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