Page 29 - Banking Finance December 2018

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effecti e ana e ent of credit ris is a critica co ponent credit scores. he traditiona approach to the credit ana sis
of a co prehensi e approach to ris ana e ent and is in o es ana sis of the a o e fi e s s ecti e ei ht
essentia for the on ter s ccess of an an in the arri e at a credit score and reach a credit decision
or anisation. t is i perati e for an s to ha e a ro st i re .
credit ris ana e ent s ste hich is sensiti e and
responsi e to the e istin and e o in sit ations and
en iron enta factors. redit ris ana e ent
enco passes identification eas re ent iti ation and
contro of the credit ris e pos res. redit ana tics p a a
cr cia ro e in this process.

. re it na ti s
cc rate eas re ent and assess ent of credit ris is
critica as the a it of credit e pos re is one of the ris iest
areas for an s. ccordin credit assess ents ha e to e
sophisticated directed and strea ined. er ti e as credit
ris has eco e ore di ersified and ore co p e the
i portance of acc rate credit ris assess ents and the need
to nderstand the ain co ponents that dri e the credit
ris has increased. orrect pricin and ana e ent of credit
ris e pos res hin e on their assess ent. i i ar the
s per isor a thorities ho ha e to ens re that the an s
credit ris ana e ent s ste s are s fficient safe and
so nd precise eas re ent of credit ris is i portant as
an deficienc in this re ard a eopardi e a an s
profita i it and ti ate its s r i a hich a a so
i ur tr ition r it n tics
ass e s ste ic proportion. o e er it is diffic t to
standardi e circ stances eadin to defa ts and hence
ssess ent of the a o e para eters is s a ade on the
detai ed specific ana sis and foresi ht are needed instead
asis of traditiona data so rces s ch as credit histor
of ha in a road r sh approach.
ref ectin the e istin financia footprints of prospecti e
redit ana tics se ethods and processes to nderstand orro ers as a pro for the character and capacit . rther
and predict the i e eha io r of the prospecti e other financia data s ch as net orth ta pa ents
orro ers in respect of the repa ent and adherence to inco e strea financia assets etc. are sed for an
the ter s of the a ree ent of a credit proposa ased pon assess ent of the other para eters. ost a an s se
certain para eters and assess ents ade thereof. this s ste for their credit appraisa and sanction process
ssentia the credit ana sis capt res the infor ation ho e er this has not een a e to pre ent the occ rrences
a o t fi e s of a potentia orro er na e character of oan defa ts and reach of co enants and second the
capacit capita co atera and condition. redit ris pro e ith an approach ased on the e istin financia
eas re ent depends pon has three e co ponents footprints is that it e c des the hitherto n an ed se ent
na e ro a i it of efa t pos re at efa t of the econo oth in the indi id a and nor ani ed
and oss i en efa t . redit ana tics he p in se ent.
assi nin a pro a i it for the i e ihood of defa t ased on
the antitati e and a itati e factors. hese three credit Moreo er an ti es the financia state ents fai to
ris co ponents are sed to assess the credit ris associated present a tr e and fair position of the siness and the
ith oth orro ers and instr ents hich is ref ected in pro ections a not e rea istic. n ie of the i itations

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