Question

What are the special challenges of international credit analysis as opposed to domestic credit analysis? How can a bank meet these challenges?

Answer 1

International credit analysis is more complex than domestic credit analysis due to following factors-

A. Presence of of changes in in currency rates between domestic currency and foreign currency is a factor that should be accounted before providing International loans.

B. Changes in monetary policy in different countries should be considered because that will be determined in the repayment ability of the borrower.

C. understanding of the demand pattern and inflation rates and interest rates all across the globe will be helpful in determination of the credit repayment ability of the borrower.

D . Banks should also be considering the political stability and other rules and regulations fluctuation in other countries which will be affecting the overall receivables.

E. Bank should also be considering the income pattern and change in the demand and supply in another economy because it will be determining the overall the payment ability of the company.