General Methods of Management the Credit Risk

This risks related to the lending activity is one of the most important risks that a financial-banking institution should manage. The improper or ineffective management of this kind of risks can have significant financial effect for the respective institution. Therefore, the top management has a very important role to ensure the credit risk management framework that comply both with the shareholders’ expectation and also fulfil the regulatory requirement imposed by the supervisory authorities. This means need to establish proper systems, norms/procedures, and qualified staff that can assure the adequate management of the specific Credit risks. In this paper we intended to present an overview of the main elements related to the administration of credit risks that the management of financial-banking institutions should take into account. We took into account the common sources of the major credit related problems, the phases of the credit risk management, the general methods used by most of the banks in the monitoring of the credit portfolio and finally we included also strategical considerations that should be contemplated by the top management in order to properly manage the credit risk and to avoid as much as possible unexpected/unwanted situations.