Mechanism and Model for Decision-Making in Credit Risk Management

Abstract

The article deals with the problem of risk reduction of the banks, credit portfolio. The new mechanism for credit portfolio quality management is proposed, featuring a combination of quantitative and qualitative criteria for assessing the credit portfolio quality and its monitoring. This mechanism supports decision-making on approving or rejecting a credit application in accordance with the permissible risk factors values. The model for optimization of the credit portfolio structure is developed. It provides an optimal ratio of long-term and short-term credits and ensures the maximum of the credit portfolio profitability under various credit policies.