Mechanism and Model for Decision-Making in Credit Risk Management

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.