CREDIT RISK OPTIMIZATION FROM THE POINT OF VIEW OF BANKING INSTITUTION: THEORETICAL AND APPLIED PRINCIPLES

Анотація

The implementation of effective banking activities helps to maximize the profits of the banking institution, because it is due to credit operations that the main part of the profits coming to the reserve funds is formed, as well as directed to the payment of dividends to the bank's shareholders. Therefore, minimizing credit risk and solving the problem of non-performing loans are one of the key priorities in developing a banking business strategy. Credit risk is the risk that a borrower will default on its principal debt and interest on its use. Credit risk management (its minimization) is carried out by means of the following measures: credit limitation; diversification of the bank's loan portfolio; control over the use of credit and efficiency in debt collection; credit insurance; sufficient and high-quality collateral for loans; analysis of the borrower's creditworthiness. The share of non-performing loans (NPLs) in Ukraine was 48.4% at the beginning of 2020. It has remained extremely high in recent years, although it has been gradually declining since 2018. The high share of NPLs is the result of credit expansion in previous years, when borrowers 'solvency standards were low and creditors' rights were insufficiently protected. Another important reason is the practice of lending to related parties who stopped servicing loans during the crisis. Today, all non-performing loans are recognized by banks, the level of coverage of their reserves is constantly growing and is approximately 95%. Strategy formation regulation and minimization of credit risk in scale government (at the macro level) is necessary to achieve financial stability of the banking sector. The purpose of the strategy is to regulate and minimize credit risk at the bank level (at the micro level) should be in the location optimal ratio between profitability, risk and liquidity of the bank's credit operations. This article analyses the state of bank lending in Ukraine and develops a method of optimizing credit risk in terms of protecting a banking institution. The distribution of credit risk of Oschadbank JSC and the level of non-performing loans of the bank are analysed. Recommendations for the protection of a banking institution in terms of optimizing the existing credit risk are given.

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