UDC

Authors

Abstract

Long-term loan is one of the main catalysts activating the development of various sectors of the economy, and it is banks that have to step up as experienced valuers and distributors of free financial resources of the state. Credit resources have limits, thus optimization of the loan portfolio of a commercial bank, when it comes to yield, term and reliability (return), is a burning issue. The paper aims to assess the efficiency of methods and techniques used to select potential borrowers in terms of their creditworthiness, since under present conditions a balanced loan portfolio determines the competitiveness of a bank. The article compares certain models of assessing borrowers’ creditworthiness within the frame of the selected type of loan portfolio formation and special cases of granting a loan, which, ultimately, determines the efficiency of the credit mechanism and is always associated with the use of best credit management practice in line with the credit terms. The main conclusion is that, despite the variety of methodologies of assessing a borrower’s credit rating, one cannot claim that there is a universal algorithm allowing a credit organisation to make an accurate final decision on granting a loan. This goal can only be achieved by applying complex analytical procedures aimed to evaluate the risks and compare the findings with the initial picture of the prospective borrower. This approach makes the evaluation process more complicated, but at the same time minimizes the disadvantages of certain classical methods that can be used in combination to achieve a common goal.

Keywords

References

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