Abstract
Abstract. The article examines the concept of «credit policy» through the prism of the functions outlined in the development strategy of the banking institution, which is primarily aimed at maximizing resources for rapid response to uncertainties of the external and internal environment. The complex of identified key characteristics allowed to form a holistic view of the nature and specific features of the commercial bank’s credit policy. The article underlines that in conditions of uncertainty, the bank should take into account external and internal environmental factors that have a direct impact on the dynamics of lending to individuals and businesses, and need to be considered at the stage of strategic financial planning, monitoring the implementation of set tasks and in order to timely adjust the policy according to the banking institution’s needs for financial and economic security. The systematised factors are interrelated and interdependent and can have a multifaceted impact on the current state of the credit services of banking institutions’ market and such market’s trends. The article establishes the role of analysis and monitoring of banking institutions’ credit operations in the context of ensuring the effective results of the commercial bank’s credit policy. It is identified that credit risk is now in the spotlight of banking institutions along with the risks of capital adequacy and legal risks, due to the general decline in economic activity of consumers of financial services as a result of the epidemiological crisis and the introduction of quarantine restrictions, which reduced household incomes and negatively affected the financial situation of enterprises. The dynamics of changes in the share of NPLs by groups of banks is analysed, revealing foreign banks’ active work with NPLs. The study pays attention to the use of analytical tools of the commercial bank’s credit policy as a means of managing its financial and economic security in conditions of uncertainty, which concerns constant monitoring of loan portfolio quality and timely detection of NPLs. It also suggests the sequence of lending steps specifying practical aspects of use of analytical tools of credit policy. Keywords: credit policy, commercial bank, management, uncertainty, economic environment, analytical tools, financial market. JEL Classification E51, G21 Formulas: 0; fig.: 7; tabl.: 0; bibl.: 14.
Highlights
A large proportion of banks experience a decrease in profitability and investment attractiveness owing to high risks in the credit segment of the financial market, which are due to the uncertainty of the economic environment and quarantine restrictions
There is no unified understanding when it comes to the economic nature of the concept of «credit policy», which led to the debatable nature of this phenomenon and makes topical the consideration of its key conceptual features: a) the strategy and tactics of a commercial bank; b) an internal document of a commercial bank, which it follows when forming a loan portfolio; c) the system of rules, measures and actions of the bank in the field of lending to its customers; d) directions, priorities, principles and goals of a commercial bank; e) the general approach and concept of lending; f) an integral part of the commercial bank’s general policy
The bank should take into account external and internal environmental factors that have a direct impact on the dynamics of lending to individuals and businesses, and need to be considered at the stage of strategic financial planning, monitoring the implementation of tasks and in order to timely adjust the policy according to the needs for financial and economic security
Summary
A large proportion of banks experience a decrease in profitability and investment attractiveness owing to high risks in the credit segment of the financial market, which are due to the uncertainty of the economic environment and quarantine restrictions. There is no unified understanding when it comes to the economic nature of the concept of «credit policy», which led to the debatable nature of this phenomenon and makes topical the consideration of its key conceptual features: a) the strategy and tactics of a commercial bank; b) an internal document of a commercial bank, which it follows when forming a loan portfolio; c) the system of rules, measures and actions of the bank in the field of lending to its customers; d) directions, priorities, principles and goals of a commercial bank; e) the general approach and concept of lending; f) an integral part of the commercial bank’s general policy The complex of these characteristics allows to form a holistic view of the nature and peculiarities of the credit policy of a commercial bank.
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