Abstract
A bank’s credit portfolio should be well structured, of high quality, and profitable. The efficient loan portfolio implied in the foregoing is both strategic and crucial in attaining and sustaining required liquidity, financial performance, and growth. Besides, since loans are both prime risk and earning assets, a bank should do anything but book poor-quality loans or mess with its loan portfolio. Thus this chapter assesses patterns in risk-asset creation by banks in emerging economies, and how the observed patterns impact the composition, risk, and profitability of lending portfolios of banks. The analysis builds on the need to strengthen the credit process, institutionalize risk management culture, and improve the conduct of lending in banks in emerging economies. A related need is to reinvent oversight of lending and credit risk management. In doing so, emphasis is placed on how best to devolve credit authority and responsibility to lending officers and enforce accountability for reckless lending.
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