Credit risk banking strategies needed

08/14/2013 12:00 AM

A financial crisis causes
BAGHDAD - Hussein ثغب of Tamimi

Student academic expert d. Sadiq Shammari Adarah the banks to adopt the necessary measures to confront and deal with cases of tripping or exceeded the risk of financial crises, pointing to the importance of doing the drafting and drawing their own strategies for the treatment of non-performing loans have and that is one of the causes of the crises in developing countries.

He said in an interview for the (morning) that the causes of financial crises that have occurred due to the breakdown and lack of respect for the banking system and policies internationally recognized, any lack of commitment to the basics of banking business sense in managing profitability, liquidity and credit risk management and management of capital adequacy, as well as to circumvent the control procedures normal banking by getting rid of loans by moving them from the budgets of banks and convert them into bonds and then marketed to many financial institutions offers and attractive returns.

 financing costs
Turning Shammari challenges caused when non-payment and begin problem of lack of liquidity and then the high cost of funding and access to liquidity needed, noting that the recent financial crisis, according to U.S. sources and global She devoured until the end of 2008, up 23 trillion dollars of wealth employee in the money market world decreased market value of 52 trillion dollars in July 2007 to $ 28 Drliun the end of 2008, and this is what the form of an imbalance in the financial and banking system in general, where the banking crisis began (the mortgage crisis) has become economical.

Failure to achieve returns
He Shammari that the issue of management of non-performing loans and the results Alemtemkhaddh it became a controversy and debate intellectually in the banking and institutional Because of its dimensions serious credit policies for financial institutions and banking, and thus stand in the way before them in achieving returns optimal or expand market share it has to be to know what loans faltering and the reasons that lie behind the tumble of these loans, as is one of the themes that preoccupied many economists and financial thinkers and bankers.

He called on departments lot of financial and banking institutions that lend a hand to all sectors (industrial - agricultural - service - etc.), so it is a mediator between units of surplus units and deficit and the other part is described as can be likened to the heart in the body is pumping blood to all parts of the body, so the financial and banking institutions pumped money into all sectors in order to develop and develop and bring life out, on the grounds that the financial and banking institutions episode of the evolution of economic and financial support to any country, a reflection of its by economic and financial as the mainstay of the economy and its axis.

Credit Risk
He said that the activity of financial institutions and banking core is in the granting of loans and banking facilities or the granting of credit and accepting deposits and through this activity will face the banks several risks, including credit risk, and result in the risk of problems in the repayment of this credit, which represents non-performing loans, which are trying to identify the fundamental aspects.

Operating risks
Shammari continued saying: Credit risk refers to the inability of the other party to fulfill its obligations agreed or when behind the borrower to repay the loan amount on the date specified This is a risk of more types of risk importance and the oldest in spite of the emergence of modern forms of risk, as it is no longer appropriate to deal with the credit risk away from kinds of other joints, especially the risk of operating with offers, pointing out that the Basel Committee on Banking Supervision has demanded that banks need to maintain an average capital adequacy is suitable for at least 8 percent were determined in Iraq to 12 percent in order to cover credit risk, ie may not fulfill the borrower to pay the loan amount and accrued interest in the due date and the prospect of loss as a result missed opportunities for investment by the non-employed so must reduce the degree of credit risk and thereby reducing the margin of loss resulting therefrom, and could manage the bank to check if the relationship bank borrower ongoing relationship and enjoy the capacity to follow up and monitor the loan after giving confirmation of the activities that she invested.
 
Pricing of loans
He added that the credit policy and accurate sound is requiring that these loans are paying to avoid the loss and play management of the bank and the expertise and efficiency of its agencies play a vital role in this area, including that all the banks, without exception face credit risk, as well as the seriousness of these risks have to focus on how to address These risks, which can be identified several possible methods to support banks mitigate or reduce the risks, including the pricing of loans and here we must determine the amount of the loan, plus the interest rate prevailing in the market, in addition to the risk premium and other administrative expenses.

Screening funds
And alluded to the need to determine credit limits, where most of the Iraqi banks look to solvency as everything is owned by the customer from the funds of movable and immovable, and if we go back to the international rules prevailing in the world will notice that the solvency GOES only to examine movable and immovable property related activity which exercised by the customer for the purpose of obtaining a loan or credit facilities required all kinds, where the bank calculates the overdraft as a percentage of the turnover of activity that can be exposed to the chronological disparity between cash inflows and outflows.

 


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