Credit risk transfer and financial sector stabilitY

Credit risk transfer and financial sector stability

Table of contents

Chapter 1: Introduction

Background

Financial Institutions (FI) are very important in any economy. Their role is similar to that of arterial blood in the human body because ZI pump funds for economic growth from the depots where they are needed. Commercial banks (CBS) ZI and most important providers of financial information for business. They also play a very important role in emerging markets, where borrowers have no access to capital markets. There is evidence that well-functioning central banks to accelerate economic growth, while central banks tighten the malfunctioning hinder economic progress and poverty. (Heffernan, 1996 10)

Problem statement

The problem statement for this study will be to find the main components of CRM system that differ in CBs operating in a less developed economy from those in a developed economy.

Purpose

The purpose of this paper is to evolve a conceptual form to be used further in comprehending credit risk management (CRM) system of financial banks (CBs) in an finances with less developed economic sector.

Rationale of the study

CBs face diverse risks that can be categorized into three groups; economic [with borrowing risk (CR) being a component], operational and strategic. These dangers have distinct influence on the presentation of CBs.

Aims and objectives

The aims and objectives of this paper will be, to study how CBs are operating in economies with less developed financial sector manage their credit risk. The paper will identify issues in order to establish a CRM system by CBs operating.

Significance of the study

The size and amount of losses caused by CR in comparison to other heavier lead to bank failures. Over the years there was an increased number of major banking problems in both mature and emerging markets have been. Various researchers have investigated the reasons banking problems and identified several factors. Credit problems, especially weaknesses in credit risk management (CRM), have been identified, some of the most important reasons for banks difficulties. Loans form a large part of the CR, as they usually account for 10-15 times the equity of a bank.

Research questions

How CBs are operating in economies?

How credit risk transfer helps in financial stability?

How to set up a CRM system?

Chapter 2: Literature Review

Central banks face different risks, which can be divided into three groups, financial [with credit risk (CR), a component], operational and strategic. These risks have different effects on the performance of central banks. The size and amount of losses caused by CR in comparison to other heavier lead to bank failures. Over the years there was an increased number of major banking problems in both mature and emerging markets have been. Various researchers have investigated the reasons banking problems and identified several factors. Credit problems, especially weaknesses in credit risk management (CRM), have been identified, some of the most important reasons for banks difficulties. Loans form a large part of the CR, as they usually account for 10-15 times the equity of a bank. This will give financial difficulties is likely if there is a slight deterioration ...