Credit Risk Evaluation in National Banks

Khaled Mohamed Ahmed

Abstract


he last decade has unexpected losses of large amounts in the
T
banking industry. Firms that had been
performingwellsuddenly announced large losses due to credit
exposures that turned sour, interest rate positions taken,or
derivative exposures that may or may not have been assumed to
hedge balance sheet risk. In response tothis,commercial banks
have almost universally embarked upon an upgrading of their
risk management andcontrol systems.
National banks are providing services such as accepting
deposits, making business loans, and offering basic investment
products. It also deals with deposits and loans from corporations
or large businesses, as opposed to individual members of the
retail banks.Commercial banks have to avoid financial risk with
their investments and cash security measures;also they must
establish credit risk policies that minimize loan losses.
Credit risk can jeopardize lending and the financial areas of
banks and credit unions. In every bank can appear losses occur at
every bank; credit risk that is not properly evaluated and
managed can lead to excessive loan losses and damaging the
financial condition of financial institutions. Properly managing
credit risk, along with improving the earnings of the loan
portfolio, can prevent excessive financial damage.All lenders
must reduce their risk of loan loss. Credit risk management has
responsibility to prevent potential loan loss. Borrowers with
consistently poor credit reports or excellent credit scores allow
lenders to make easier approval and rejection decisions.
The goal of this study is to analyze the impact of credit
riskmanagement on the financialperformance of commercial
banks.

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