Chapter 22 - Fine-tuning Principles of Bank Lending for Emerging Markets

Abstract

The framework for risk management in bank lending that the five C's and their underlying principles furnish is dependable—notwithstanding that some academics have postulated alternative approaches that seek to model credit risk. This chapter examines the significance of the five C's from a different, emerging markets' perspective. The objective in doing so is to establish a fit between the C's, their underlying principles, and the goal of contemporary bank credit risk management in emerging markets. The topics are discussed in a way that shows why and how the goal of risk management should be defined in the context of underlying principles of the five C's such that the two ends are mutually reinforcing. Thus, from an emerging markets perspective, this chapter sheds light on how the goal of credit risk management is best defined in the context of, and attained through a rigorous adherence to, the cardinal principles of bank lending.