give recommendation on credit risk and the hedging strategy for the banks

Expert Solution

Credit risk involves inability of a customer to meet commitments in relation to Lending trading and hedging settlements and other financial transactions . the credit risk generally made up of transactions risk and portfolio risk. The credit risk of a bank portfolio depends on both external and internal factors. the external factors are the state of the economy , foreign exchange rates and interest rates , trade restrictions, economic Sanctions etc. the internal factors are defficiencies in loan repayment , credit concentration limits etc.

Strategies for Credit risk and Hedging of Bank:

Credit risk mitigation strategies in a bank taking place in two phases. Pre-sanction and Post-Sanction Phase.

Identification and verification of Borrower
Fraud Risk mitigation
Credit appraisal
Convenants in sanction endorsement: The terms and conditions of sanction endorsement duly acknowledged.
Documentation
Risk based Pricing
Post disbursement Monitoring
Loan review Mechanism
Provisions to absorb losses

jeff jeffy answered 11 months ago

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give recommendation on credit risk and the hedging strategy for the banks

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