Banking system and its development in the period of transition to the market

6. Interest rate swaps. Under the interest rate swap realize exchange of interest payments in E s (but not payments to foundations Nome debt) credit obliga t you concluded on the same amount, but on different terms. Eg Prospect of interest rate may be floating or fixed rates landmark in different markets loans tion sprinkles and fishing.

Methods to reduce the interest rate risk

Interest rate risk can be reduced through the application of the following equation m e ods:

1. Insurance interest rate risk. As well as insurance tion of credit risk it assumes complete transfer of appropriate risk insurance on p Organization.

2. Granting of loans with floating interest rates, Such measures allow the bank to make appropriate of changes in the interest rate on this loan in s in accordance with fluctuations in market interest rates. As a result, the bank is able to avoid potential losses in the case of n Vyshen market rate loan of cents.

3. Term agreements. This method of protection against interest rate risk associated with

We magnify the terms of borrowings; reduce loans with fixed interest on the interest rate;

reduce the time and invest Nations, pro d amb of the investment (in the form of securities);

obtain long-term loans; close some ri with kovye credit lines

Start shortening borrowings; start lengthened ting investment periods, start training to increase the share of loans with fixed Comrade hundred in Coy, to prepare for the increase in the share of investment in securities boom and connecting rods;

consider in the Possibility of early redemption Sheni I Zadoya l fixed intensity of c entnoy rate

Shorten the period of borrowings; increase the share of the loan and then in a fixed in the luxuries of a hundred in Coy;

increase the timing and size of port f ator investment Nations; open credit l and SRI

Start lengthening the terms of borrowings; abbr start and u ix timing Institute in estitsy; uv e lichit share of loans with floating ing hundred in Coy;

reduce investments in securities Act; selectively direct about giving assets with fixed income or the interest rate of concluded between the Bank and the customer spe cial forward agreements to provide in th Vorenus day loans in a certain amount and under the mouth of a new lenny percent. Thus, pre-fixed date, the size of future credit and charge for using it. Concluding such an agreement, the bank and the ogre firmed by themselves from the risk of loss in case of a fall at the time the loan market interest rates. With increasing rates of these same wins undermines customer floor at foreclosing the loan for more Kuyu s no fee.

Methods to reduce credit n th risk

There are five main ways Redeye e of credit risk:

1 . 's credit rating. Workers usually give credit limit d this respect it met about do , because he sound of it possible to prevent the practical e ski fully all possible losses associated with bad loans. To determine a borrower's creditworthiness, there are many different approaches. However, in the village l ednee in the practice of foreign banks all used on occupations are spread n s gets a method based on tion point evaluation ssudop ol teach e la. This method assumption proposes the development of specific scales to determine the re st Thing climate e -coagulant criteria by which Mfr about ditsya rating of the borrower, and n is strictly vidual for each bank and are based on his practical experience. These criteria peri about cally is reviewed Vвyu t camping, ensure that REMARK ivaet increase efficiency analysis to effec kreditosposo used completely.

Analysis of the creditworthiness of the borrower lities begins with an examination of the following aspects of his de yours elf:

- Analysis of the factor C 1 . In social marketing concepts that represent an opportunity factor enterprise-manufacturer their wares Satisfactory e doeth the interests of consumers. In other words, there are tons of manufacturers if and only if their product needs consumers. Through tion methods differ h rows factor (including regression) analysis identified are:

* Correspondence between supply and demand e tion;

* The ability to manufacturer certain social groups interested potential and / or actual consumers;

* Optimal choice of market segment (window niche), etc.

- Analysis of the factor C 2 that welcomes interests sa direct proi s driver, ie its ability to make profits and to dispose of it. This analysis is done by e next blow u them on the boards:

* The level of costs of the producer;

* "Solidity" producer, ie timely payments to earlier on the floor at chennym cred and there, its capital base as a borrower;

* His reputation (rating), his desire and determination to meet their on I zatelst in a;

* possibility of lien from the TS alive its banks and banking institutions.

Bank must always control the quality of the collateral, uro Wen to whether its visibility, but t wo w ix its market value with time example of the loan.

Distinguish between so-called hard (fixed) and floating conductive deposits. To the solid collateral relates property which may be granted a loan and the borrower in case of impossibility tori Oplan tit its obligations. In this case, the entity (the borrower) has no more rights and dispose of them. Most often fixed mortgage vannomu include a mortgage on real fixed capital, at least - receivables, value stocks, bonds and other securities used in the magician on the property.

By floating charge are primarily stocks of inventory and finished goods. Sometimes it can be extended to all the property of the borrower, except providing lennogo already TBE p Dy bail.

Typically, the decision to adopt a rigid or floating charge secured creditor taken most often by the bank. This is a way to protect the borrower from pr e Tenza other creditors on its property in case of violation of its financial stability.

- Economic and statistical analysis of creditworthiness and ability to transfer e cl and STE in the chosen methodology.

In our view, once a year (half, quarter) when establishing relative w eny between the bank and the new borrower and / or the active Macroeconomic dynamics and kinetics necessary to conduct a detailed analysis of the creditworthiness of lys lities.

Much more often necessary to carry out the so-called ex -press analysis, through which the bank becomes aware of the current financial condition of the client present.

For analysis of creditworthiness and solvency of the borrowers bank ka n e ff e necessity following information:

a) annual, quarterly, monthly finance statements about Vai;

b) detailed structure Inventories c ennostey, p tion debtors and accounts payable, at least in the last 18 months of e m;

c) the company's business plan;

g) marketing plans, production and management in tion;

d) analysis of the industry to which the z and borrowers;

e) cash flow forecast loan ni ika with its customers and counter agents for the period and absorption sheniya loan.

2. Reducing the size of granted loans to one borrower. Cn This applies to own, the bank is not entirely sure enough kreditosposo used completely client. Reduced weighted loan size reduces the value of n losses in the event of his return.

3. Credit insurance. Credit insurance assumed full before Gaeta and its risk of default chu organization dedicated insurance. There are many different varieties of credit insurance, but the costs associated with their impl e stvl e or e m, usually refer to ssudopolu breakers.

4. Attracting sufficient collateral. This method is almost full of Stu bank guarantees issued to refund the amount and the receipt of interest. An important point is the fact that the size of the loan provision should cover not only the amount of loans, but also the amount of interest on it. However, all the same priority with protection against credit risk should otdavat s smiling not attract sufficient cheniyu software designed to for covering losses and analysis of the borrower's creditworthiness aimed at nedopusch ting these losses as the loan is not issued in the hope that it absorption and sheniya have to sell assets as collateral, and that it will be returned in accordance with the loan of dogs rum.

5. Issuance of discount loans. Discount loans only to a small extent can reduce credit risk. Such a method of lending and g tees at least receive fees for the loan, and the question of its return remains smiling t open if not used other methods of protection against credit risk of.

In the practice of commercial banks in developed market economies is widely used banking system ha safeguards. Depending on the number of banks participating in garantsionnyh operations, distinguish , direct, and to a governmental intermediaries nical operation.

Typically, the basic elements are the sum of bank guarantees, cond tions and duration of payments. The following types of bank Minkowski r and safeguards:

1. Guarantee performance of the contract or guarantee of delivery (perfor Mance Bond, delivery guarantee). They cautioned in lyayut businesses that need to make the delivery of a particular commodity, provide a service or perform a chit engineering work. The object is to guarantee the fulfillment of contractual obligations, about Otherwise the bank is obliged to pay a certain amount of pur Patel (consumption and Tieliu). Modification of this warranty is ha welt level of performance (performance guarantee, performance bond), which is used only in ful l nenii builder tion, installation and other specific engineering work for production purposes. In this case, the bank is obligated to pay det e dividing the amount in full or in part is non contractual Liabilities and complements ments.

2. Bargaining guarantees (bid bond, participation bond), providing that lyayutsya uch ticipants and trades to ensure the availability of price lists, the fulfillment of its obligations. In the case of non-degenerate fulfillment of the condition of trading bank also must pay determined lennuyu sum to the aggrieved about not Sided.

3. Guarantees advance (advance-payment guarantee) used when performing large orders: construction of buildings, structures. Since the order is carried out in te over an extended time periods or, artist must be sure that at the end of the consumer does not change his mind and will not give up and you make EXECUTE. For its part, the consumer should be sure to get the ordered goods in the right quantity and quality and on time. Liabilities at default and the bank must pay ments determined lennuyu amount to the injured party. John always about the amount of guarantees author cally decreases as the performance of some stages and Liabilities ments.

4. Guaranteed no bill of lading (letter of indemnity) envisaged for provisional mismatch between the transport of goods and supersaturated L Coy accompanying documents. With her ??help schyu reduced payment for removal of additional storage on premises, payment for idle vehicles, reducing the risk of delivery of defective goods, goods which are not responding to all of the agreed advance Heat demand and tions, etc.

5. Warranty incomplete (incorrectly drawn) document p s (guarantee in respect of inconsistent documents). The Bank provides consumer and / or Mfr about DESTINATION means necessary to continue normal activities regardless of the specific situation unfavorable tion u s related to improper execution accompanying document and tion.

6. Guarantee for Customs authorities (guarantee towards customs authorities) expressed in the obligation to pay all the banks that Maugenet formalities associated with a reall s Coy goods.

And finally, we can note a few ways to control the level of risk of banks and banking institutions. These can be rel e STI:

* Preliminary assessment of potential losses using forecast tion met on analysis of available rows of static and dynamic reliable information on the activities of the banks themselves, their cus tomers, contractors, their suppliers and entered via e nicknames competition comrade and various contact groups aud and thorium. For this purpose, com mercial banks should create departments dealing with the analysis of the level of risks and develop measures for the control of e NIJ in the marketing system;

* Dynamics of interest rates, which increase with the degree of risk uv e increment a, and vice versa, ie rates freely formation u ayuschimsya tools below rates for instruments with limited reversibility bounded; rates nym versatile operations and operational talkies in the interbank market are usually lower rates and to against nym opera n iyam and credit transactions with customers; than a hundred meters BEATER zae crate, the lower interest rates, long-term change more smoothly (with the account that e temporal smoothing) than short-term, interest rates on loans to ensure e cheniem and briefly urgent opera n iyam lower than the rates on unsecured and short kosrochnym op e talkies;

* Risk diversification, representing his rassredoto chenie. It can manifest in lyatsya in different types:

a) lending to smaller amounts to a larger amount of clients with a total storage of credit;

b) provision of loans konsortsionalnoy basis when to issue a large amount of the loan together several banks forming consortium to n;

c) attracting deposits, securities of smaller amounts from the larger chi la with depositors.

Just one way of banking risk management is insurance. Insurance is one way to protect against emerging in the banking business risks. With the help of insurance covered by the two major categories of risk: economic and political.

Many states (mostly western) to promote exports through state insurance agencies carry out export credit insurance against political risk. Private insurers such insurance is usually not carried out.

At its core credit insurance to reduce or eliminate credit risk. Credit insurance facilities usually serve commercial loans (loans, provided by the supplier to the buyer), bank loan supplier or buyer. Commitments and guarantees for the loan. Long-term investments and other defense interests of the seller or bank lender that in the event of insolvency of the debtor's failure to pay a debt or for other reasons repayment on the loan incurs insurance organization.

In international practice, credit insurance as a specific type of insurance arose in the 19th century and was bred by economic crises and instability. Modern forms of this type of insurance accepted only after the Second World War. In domestic practice, credit insurance began in 1990.

Insurance is provided on a voluntary basis in two forms:

- Liability insurance for borrowers for non-payment of loans;

- Insurance against the risk of credit default.

In the first case, the insured is the borrower, the insurance object is his responsibility to the bank that issued the credit for the timely and full repayment of the loan (including interest on credit). In the second case the policyholder bank and insurance object-responsibility of all or individual borrowers to the bank for the timely and full repayment of the loan and interest on loans.

For the conclusion of the contract of insurance (insurance certificate) the policyholder to the insurer provides a specific set of documents. The list of documents is the insurer. The main purpose of providing documentation, to determine the degree of risk and insurance payment on the basis of the amount of its insurance premium (fee).

The most significant moments in insurance are:

- The amount of liability accepted by the insurer;

- Determination of the insured event;

- Procedure for damages;

- The size of the insurance rate and premium;

Conditions of compliance with each of these points are specified (set) individually. However, the weakness of insurance supervision in Russia gives rise to various kinds of abuse. Excessively high premiums lead to obtaining insurance companies "unearned" income, increase in production costs due to insurance payments is unreasonable increase of prices of goods and services.

And the most important fact is that commercial banks can not today without fear for themselves to use credit insurance as a form of protection against risks arising in the course of banking activities. The virtual absence of insurance audit and wide media coverage balances insurance companies questioned the solvency of the latter. Given these shortcomings, the process of credit insurance in Russia is developing very slowly.

Overseas experience shows that in Austria issued a loan to one borrower may not exceed 50% of the shat and capital to the bank.

In Ireland, one investor should not be placed in the bank de positive, pr e exceeds 10% of total bank deposits in , and one of the largest contributions 0 d sors should not keep in the bank more than 40% of its deposits.

In the UK, commercial banks must inform the Bank of England on every deposit bonus is 5% of all de positive.

In the USA the so-called law Johnson (from 1 934), for providing loans to countries prohibits not repay its debt obligations ne ed by the U.S. government and is not be members of the International Monetary Fund.

Thus, the regulation of bank risk is not based on an assessment of the fi nancial position of the borrower, and the establishment of a certain ratio between the amounts of e loans and equity of the bank, that is supposed to create a reserve for potential banks to cover possible losses tion w busted case of clients.

Chapter 3. Analysis of banking risks and methods of control (On materials of Samara AK Bank SB RF)

Bank makes a profit, performing various operations and providing certain types of services. Lending a long time and is widely regarded as a classic, one of the basic services. Lending provides a major share of bank profits. Is no exception and Samara AK Bank SB RF.

Lending, as any active operation is the operation risky. According to the Statistical Service of Samara AK Bank SB RF approximately 98% of all bank risk is in the credit risk. Thus, it can be concluded that the latter is the main bank risk. Therefore, it is advisable to focus all attention on it.

In the credit transaction subjects the credit relationship is always act as lenders and borrowers. Creditors are individuals who provide their temporarily free funds available to the borrower for a specified period. In this case, the creditor stands Savings Bank (SB). Borrower-party credit relations, receiving funds for use (as a loan), and obliged them to return within the prescribed period. In the example that will be discussed below, the Borrower acts specific entity.

Bank lending in Samara AK SB RF is based on five principles:

1) urgency;

2) serviceability;

3) repayment;

4) security;

5) the intended use.

Risk - the risk of loss. When a customer comes to the bank, wanting to get a loan, the probability of incurring losses in case of default of the loan and interest is estimated to be equal to 0.5 (or 50%), ie chance to make a profit and stay in loss-equal.

Further, in the process of gathering information from the client, the likelihood often changes one way or another. The information helps to decide on the issuance or non-issuance of credit. Thus, the bank will or will not assume a certain level of risk. If the latter value is high, then the loan is issued. On this basis, we can conclude that the collection of information itself is inherently one of the methods of regulation of banking risks.

In Samara bank AK SB RF for each borrower (if a legal entity) is going to the following documents:

1. A copy of the memorandum of association notarized.

2. A copy of the Charter (the Regulations), and approved by the founder of registered in the prescribed manner, notarized.

3. State registration document.

4. Document certifying the notification of the tax authority of the intention to open the Borrower with the Bank loan account.

5. Permission to engage in economic activity, with the term of operation (from entrepreneurs carrying out their activities without forming a legal entity).

6. Card with signature and seal (Form 0401026) notarized.

7. Annual report, balance sheet with applications for the last reporting date, certified by the tax inspectorate, indicating off-balance sheet accounts for warranties.

8. Auditor's opinion on the reliability of the report.

9. List of creditors and debtors with a breakdown of payables and receivables, indicating the date of its occurrence.

10. Account statement for the last month with the bank about the account balance and the presence of claims to the bill.

11 . Business plan showing planned for the loan term income and expenses.

12.Tehniko feasibility study loan, reflecting the economic efficiency and cost recovery during the period for which he claims credit.

13.Kopii contracts (agreements) for the event, which is requested under the credit, with specific addresses of possible buyers.

14. Documents to ensure timely fulfillment of obligations of the Borrower under the loan received: bail bonds, Bank letter of guarantee, which maintains the Borrower's account or other bank, a copy of the letter of the Borrower to the Bank, the borrower of the right of the creditor bank to withdraw funds from an undeniable mark on the Bank's borrower receipt of this letter for execution.

15. Help about opening a bank account in other banks. (Internal Revenue Service).

16. Documents establishing ownership of the borrower's collateral (the pledge of real estate - Act evaluation Russian Society of Appraisers or territorial its branch).

17. Other documents requested by the bank.

Considerable importance is the borrower's credit history. If it is already credited to the Savings Bank and at one time put out the principal and interest thereon, then the probability of incurring losses reduced. Likely loan and investment committee will make a positive decision on granting loans to this borrower. However, in any case, a lot of attention among the gathered information given accounting client. Track the dynamics of financial and other indicators. Let us see how analysis of the balance sheet and its annexes and to reduce the risk in Samara bank AK SB RF. (Reporting borrower number is contained in annex 1).

In Samara bank AK SB RF has its own method of analysis.

The method of analysis of credit risk in the bank Samara AK SB RF.

To determine the creditworthiness of the Borrower held kollichestvenny (assessment of the financial condition) and qualitative risk analysis.

The purpose of risk analysis is to identify the opportunities, the amount and terms of the loan.

1.Otsenka financial condition of the Borrower

Assessment of the financial condition of the Borrower is made taking into account trends in changes in financial condition and the factors influencing these changes.

For this purpose it is necessary to analyze the dynamics of the estimates, the structure of balance sheet, asset quality, the main directions of economic and financial policy of the company.

When calculating indicators (ratios) used the precautionary principle , that is, the asset balance restatement of items downward based on expert assessments.

1.1. To assess the financial condition of the Borrower uses three estimates:

? liquidity ratios;

? ratio of debt to equity;

? turnover ratios and profitability.

1. Liquidity ratios.

Characterize the security company working capital for business activities and timely repayment term liabilities.

Absolute liquidity ratio K1 (instant liquidity) describes the ability to service debt momentary and defined as the ratio of cash and highly liquid short-term securities to the most urgent obligations of the company in the form of short-term bank loans, short-term loans and various payables:

Cash + Short fin.vlozheniya

K1 = -------------------------------------------------------------------------------------

Total times. "Current liabilities" - (Income Funds bud.periodov + consumption + Provisions for liabilities and charges)

Under the highly liquid short-term securities in this case refers only government securities, and securities of Sberbank of Russia.

Interim coverage ratio K2 (critical liquidity) describes the ability of the enterprise quickly release their economic turnover cash and repay debt. K2 is defined as the ratio:

Den.sredstva + short fin.vlozheniya and calculations

K2 = ------------------------------------------------ --------------------------

short-term liabilities

To calculate this factor is assessed pre groups of articles "short-term investments" and "accounts receivable (payments are expected within 12 months after the reporting date)." These articles are reduced by the amount of investments in illiquid securities and corporate insolvent enterprises and the amount of uncollectible receivables, respectively.

Current ratio (overall coverage ratio) K3 is a general indicator of the company's solvency, a calculation which the numerator includes all current assets, including tangible (total balance of Section 2):

Total section "Current assets"

K3 = -------------------------------------------------------------------------------------

Total section "Current liabilities" - ("Deferred income" + "Consumption funds" + "Provisions for liabilities and charges")

To calculate the adjusted pre-K3 already named group balance sheet items, as well as "accounts receivable (payments are expected in over 12 months)," "stocks" and "other current assets" in the amount of uncollectible receivables, respectively, illiquid and difficult to be realized and reserves costs and deficit balance "Deferred income".

2. The ratio of debt to equity K4.

Is one of the characteristics of financial stability and is determined by:

Total section "Capital and reserves" - Total, "Losses"

K4 = ------------------------------ -------------------------------------------------- ----

Total section "Long-term liabilities" + Total section "Current liabilities" - ("Deferred income" + "Consumption funds" + "Provisions for liabilities and charges"

3. Turnover ratios and profitability.

Turnover different elements of current assets and accounts payable is calculated on the basis of their days in daily sales volume (day sales revenue).

The volume of daily sales is calculated by dividing sales revenue by the number of days in the period (90,180,270 or 360).

Average (for the period) current assets and accounts payable are calculated as the sum of half units to the start and end dates of the period and the total values ??at interim dates, divided by the number of terms, reduced by 1.

Turnover of current assets:

Average cost of current assets (line 290 on the balance sheet)

-------------------------------------------------- -------------------------------

daily sales volume

Accounts receivable turnover:

Average value of trade receivables (on line 230 240 + sheet)

------------------------------------ -------------------------------------------------- -----

daily sales volume

Inventory turnover:

Average price of stocks (balance on p.210)

-------------------------------------------------- ------------------

daily sales volume

Similarly, when necessary, can be calculated turnover ratios of other elements of current assets (finished goods, work in process and raw materials) and accounts payable.

Ratios are defined as percentages or fractions.

Product profitability (or profit margin) K5:

Profit from sales lines 050 form number 2

--------------------------------- Or K5 = ------------- -------------.

Revenues from sales line 010 form number 2

Return on investment in the enterprise:

Pretax income p.140 form number 2

---------------------------- Or -------------------- -------.

balance total balance str.699

1.2. The main performance indicators are the coefficients K, K2, K3, K4, K5 and. Other indicators of turnover and profitability are used for common characteristics and are additional to the first five indicators.

Evaluation of the calculation five coefficients is to grant the Borrower categories for each of these indicators by comparing the values obtained with established sufficient. Next, we determine the amount of points for these indicators according to their weights.

A breakdown of figures into categories based on their actual values:

Odds	Category 1	Category 2	Category 3
K1	0.2 or higher	0.15-0.2	Less than 0, 15
K2	0.8 or higher	0.5-0.8	Less than 0.5
K3	2.0 or higher	1.0-2.0	Less than 1.0
K4
Except trade	1.0 or higher	0.7-1.0	Less than 0.7
For Business	0.6 or higher	0.4-0.6	Less than 0.4
K5	0.15 and above	less than 0.15	Nerentab.

To determine the rating of the borrower along with other factors, the value S. The formula for calculating the amount of points S has the form:

S = Weight indicator * Weight Category K1 + K2 * Category Indicator Indicator weight * + Category + K3 * Weight Indicator Weight Category K4 + K5 * Category index.

For the rest of the third group of indicators (turnover and profitability) are not installed, or the optimal critical values due to the high dependence of these values on the specific company, sector and other specific conditions.

Evaluation of the calculation of these indicators is based mainly on a comparison of their values in the dynamics.

In Samara AK Bank SB RF counting all the necessary coefficients produced by computer. Accounting statements entered in a special program that calculates various indicators. On their basis a computer determines the ranking of the Borrower. Credit Department inspector shall make appropriate calculations and print the data is stored in on this kreditozaemschiku. (Annex 2.3)

2. Qualitative analysis based on the use of information that can not be expressed in quantitative terms. For this analysis uses information provided by the Borrower, security and database information.

At this stage, the risks are assessed:

Industry:

- Market conditions in the industry;

- The trend in the development of competition;

- The level of state support;

- Importance of the enterprise within the region;

- The risk of unfair competition from other banks;

Liability:

- The risk of redistribution of share capital;

- Consistency positions of major shareholders;

Regulation of business:

- Subordination (external financial structure);

- Formal and informal regulation of the activity;

- Licensing activities;

- Benefits and risks of their removal;

- Risks of fines and penalties;

- Enforcement risks (the possibility of changes in the legislative and regulatory framework);

Production and upravlechenskie:

- Technological level of production;

- Resupply infrastructure risks (price change of suppliers, supply disruptions, etc.);

- Risks associated with banks, accounts are opened;

- Goodwill (accuracy in the performance of obligations, credit history, participation in major projects, the quality of goods and services, etc.);

- Quality control.

3. The final step is to determine the credit assessment

rating of the Borrower or class.

Fits 3 classes of borrowers:

Classy - lending is not in doubt;

Second class-lending approach requires any suspended;

Third-class lending associated with increased risk.

Rating is based on the scores on the five main indicators, assessment of other indicators of the third group and qualitative risk analysis.

The total score S affects the rating of the Borrower as follows:

S = 1 or 1.05 - Borrower may be assigned to the first class credit;

S greater than 1, but less than 2.42 - corresponds to the second class;

S is equal to or more than 2.42 - corresponds to the third class.

Next thus defined a preliminary rating is adjusted for other indicators of the third group and qualitative evaluation of the Borrower. When the negative impact of these factors can Ratings lowered one class.

This grouping allows to control the identification of possible losses from outstanding loans and their prevention.

Initially, the class is defined by efficiency and risk group (respectively, ascending). Next (depending on the client extinguishes the principal amount and interest thereon) risk group may vary.

Table number 2

Table loan classification based on the formalized criteria for assessing credit risks

Group Risk	Feature loans	The reserve amount (in% to the amount of debt "
1 Standard loans	1) Current loans regardless of ensuring the absence of overdue payment%% except for concessional loans and current insiders 2) Secured loans : - Current in the presence of overdue payment%% to 5 days inclusive; - If the arrears of principal up to 5 days or less; - Rescheduled once without changing the terms of the contract	1%
2 Substandard loans	1) Secured loans: - Current in the presence of overdue payment% 6% up to 30 days; - If the arrears of principal from 6 up to 30 days; - Rescheduled twice without changing the terms of the contract; - Reissued once changes in the conditions of the contract 2) Insufficient secured loans: - Current in the presence of overdue payment%% to 5 days inclusive; - If the arrears of principal up to 5 days or less; - Rescheduled once without changing the terms of the contract; 3) Feed- current loans and current loans to insiders in the absence of overdue payment%%	20%
3 Doubtful	1) Secured loans: - Current in the presence of overdue payment%% from 31 to 180 days, inclusive; - If the arrears of principal from 31 to 180 days, inclusive; - Rescheduled twice with changing conditions of the contract; - Rescheduled more than two times regardless of changes in the conditions of the contract 2) Insufficient secured loans: - Current in the presence of overdue payment% 6% up to 30 days; - If the arrears of principal from 6 up to 30 days; - Rescheduled twice without changing the terms of the contract; - Reissued once changes in the conditions of the contract 3) Unsecured loans: - Current in the presence of overdue payment%% to 5 days inclusive; - If the arrears of principal up to 5 days or less; - Rescheduled once without changing the terms of the contract 4) Preferential loans and loans to insiders at any overdue payment of principal or%% to 5 days inclusive	50%
4 Bad loans	1) Secured loans: - Current in the presence of overdue payment%% over 180 days; - If the arrears of principal in excess of 180 days; 2) Insufficient secured loans: - Current in the presence of overdue payment%% over 30 days; - If the arrears of principal more than 30 days; - Rescheduled twice with changing conditions of the contract; - Rescheduled more than two times regardless of changes in the conditions of the contract 3) Unsecured loans: - Current in the presence of overdue payment%% More than 5 days; - If the arrears of principal over 5 days; - Reissued at least once with the changes in the conditions of the contract; - Reissued more than once regardless of changes in the conditions of the contract; 4) Preferential loans and loans to insiders at any overdue payment of principal or%% More than 5 days	100%

In our example, the borrower LLC "Tamara" should be attributed to the first risk.

In order to maintain stability and sustainable functioning of the Russian banking system, commercial banks are required to create a reserve for possible loan losses. Allowance for possible loan losses is used only to cover the outstanding clients (banks) loan principal debt.

Loans division of Sberbank of Russia and its affiliates produce monthly (as of the first of the following month) risk adjustment of all outstanding loans and debt equated to the loan, taking into account the change of the actual loan or other similar loan debt, loan risk (changes in the duration terms of overdue debt payments equated to loan), the official currency exchange rate set by the Bank of Russia on the last day of the reporting month (for a loan or debt to loan in foreign currency) per table number 2 "Table loan classification based on the formalized criteria for assessing credit risks . " (Application number 4)

To reduce the possibility of incurring losses as a result of the credit relationship Samara AK Bank SB RF uses a form of security for the repayment of the loan (mortgage, guarantee, surety, etc.). In our case, as security was granted bail.

The level of risk attached. And the methods of its regulation now have to add control over the use of credit and periodic inspection of the mortgaged property.

So, giving credit for one another, Samara AK Bank SB RF generates its loan portfolio. There is a need to analyze and assess specific risks the Bank faces in any form operations. Here it is a question of the risks within the population of borrowers.

Specific type of risk assessment

This stage involves the calculation of estimates of risk by determining the probability that the bank will incur a certain amount of loss. In other words, based on a risk assessment is to find the relationship between specific dimensions bank losses and the probability of their occurrence. This dependence is reflected in the curve being built specifically probabilities of occurrence of a certain level of losses. Construction of the curve - an extremely difficult task, requiring of employees dealing with risk, sufficient knowledge and experience. To construct the curve of probability of occurrence of a certain level of losses, or so-called risk curve, various methods, among which are:

A. Statistical method.

B. Method of expert assessments.

B. Analytical method.

A. Statistical method

The essence of this method lies in the fact that for the calculation of the probability of loss analyzes all statistics relating to the effectiveness of the Bank of the transactions. In order to increase the accuracy of calculations necessary to use statistical sampling more, which would allow to make the assumption that the frequency of occurrence of a certain level of loss is, or rather is the probability of their occurrence.

The incidence of a certain level of losses is as follows: SP

W = ---------------- where

With

W - frequency of a certain level of losses;

JV - The number of occurrence of a particular level of losses;

N - total number of cases in the statistical sample.

It should be emphasized the fact that the denominator of this fraction - the total number of cases in the statistical sample - must represent not just the number of failed operations conducted by the bank, and the total number, including still and successful implementation of this species. If not, the value of the frequency of occurrence of a certain level of losses and, consequently, the risk of the type of transaction would be considered unreasonably inflated.

In determining the frequency of occurrence of a certain level of losses should find its value as much as possible in a larger number of points (ie, at different levels of losses). Usually do it is quite difficult, then you should try to determine the values of this indicator at least four main points which will be discussed below.

To describe these points, we need to introduce the concept of risk areas.

Under the area of risk understand zone within which losses do not exceed a certain level. The figure number 2 shows the main areas of risk that should be taken into account for the risk managers.

Fig.2

Major risk areas

Profit loss

Critical risk area	Unacceptable risk area	Region Assumption of Risk
			Risk-free region

B-1 B-1 A-1 0 A B

A size-estimated earnings and A-1-value equal to the size of estimated earnings, B-size calculation proceeds, B-1-value equal to the size of the settlement proceeds, B-size bank's own funds, B-1-value equal to the size of their own bank funds.

As can be seen from the figure, providing 4 main areas of risk:

- Risk-free area;

- Region of acceptable risk;

- Unacceptable risk area;

- The critical area of risk.

Let us consider the characteristics of each of them.

* Risk-free area.

For this area is the absence of any characteristic losses in the transactions and obtaining a minimum estimated earnings. The left boundary of the risk-free area passes through the point A - the size of estimated earnings, the right boundary is simply not available because the bank's profit is theoretically unlimited.

* The area of ??acceptable risk.

Region characterized by the level of acceptable risk of loss does not exceed the size of estimated earnings. In this area is still possible to carry out this type of banking operations, the bank risks because only in that as a result of their activities in the worst case it just does not get profit, and all costs incurred will okupleny. Under normal circumstances the same, that is, when I do happen to a slight loss, the bank may get a little less profit calculated level.

* Area of ??unacceptable risk.

Within the boundaries of this area are possible losses, the value of which exceeds the estimated earnings, but not more than the total size of the settlement proceeds. It is quite obvious that the level of risk is unacceptable, as the bank is in danger of losing all its revenues from this operation, and it would mean that he made pointless costs not only time but also cash.

* The area of ??critical risk.

This is the most dangerous area in which possible losses threaten to compare with the value of the bank's equity. Critical area of ??risk associated with the concept of bankruptcy, and therefore under no circumstances be allowed a level of risk.

Examined the relation between the different areas of risk, you can see those same four points, which were discussed above. These points lie on the boundaries of the regions.

Further action on the risk assessment, consider the following example.

For several years, lending in most cases short-term nature. We estimate the risk arising from the issuance of short-term loans from banks. To do this, first, with the corresponding statistics of the data bank operations for several years, we calculate the frequency of losses, the level of which can be regarded as the boundary of each of the four areas described. Assume that the frequency of losses in the implementation of short-term lending, the left boundary of the corresponding risk-free area, ie at 0 (see Figure number 2) is equal to 0.8, and the frequency of losses at points A1, B1, B1, respectively, equal to: 0.55, 0.2 and 0.05. If the statistical number of permits, and still be nice to define a series of intermediate values ??- it only to refine the results.

Now, having at its disposal such factors as the size of losses and their frequency of occurrence, can be plotted between these variables.

The resulting curve actually represents the ratio of the magnitude of losses and their probability of occurrence, ie, it will be the risk curve, which was discussed above. This curve is shown in figure number 3.

Fig. Number 3

Curve of losses

1
0.8	A
0.55		In
0.2			With
0.05				D

0 A-1 B-1 B-1

Considering the figure, it is easy to determine what portion AB of the curve will be in the region of acceptable risk, segment BC - in an unacceptable risk, and the section CD - in the field of critical risk. In the realm of critical risk and will treat portion of the curve beyond the point D, that is, beyond the level of a bank failure. Of course, if a more rigorous approach to this question, the point B1, indicating the magnitude of potential losses equal to the size of the bank's equity, can be transformed into some other point, reflecting the amount of loss for which there is a real threat of a violation of a bank's liquidity . But while there are difficulties with the choice of the appropriate measure of liquidity, however, if the bank over the years strictly guided by a certain measure of liquidity and corresponding accumulated. Figures, calculations of risk assessment will be logical to build through it.

B. Method of expert assessments

The method differs from the expert assessment method for collecting statistical information only for the construction of the risk curve.

This method involves the collection and study of assessments made by banking specialists probabilities of occurrence of different levels of losses. These estimates are based on consideration of all the risk factors, as well as statistical data. It should again try to get as much as possible starting points for plotting between potential losses and the average values of expert assessments (probability of loss). Also as in the above method the minimum number of points for estimating the risk to be not less than four, namely:

1) The point corresponding to the zero level of losses

2) The point that determines the size of potential losses, corresponding to the size estimated earnings.

3) The point characterizing the magnitude of potential losses equal to the amount estimated revenue.

4) The point corresponding to the losses, the size of which equal largest

bank's own funds (or losses, for which there is a specific threat violations liquidity indicator bank balance).

Implementation of the method of expert assessments much more complicated if the number of these estimates is small (it is similar to the reduced number of statistical indicators in which significantly decreases the accuracy of calculations). But anyway, even an approximate idea of the level of risk gives the bank in charge of the development of risk strategies, distinct advantages over banks not conducting such work.

B. Analytical method

This method of constructing the risk curve banks almost never used, because the underlying elements of the theory of games too weakly developed to apply to the assessment of bank risk.

Thus, the existing methods of constructing the curve of probability of occurrence of a certain level of losses is not quite the same, but somehow allow to make (even approximately) a risk assessment of committing virtually all banking operations.

Constructing the risk curve and determining the allowable area, unacceptable and critical risk, marketing service worker Samara AK Bank SB RF should do more detailed analysis of these areas in terms of establishing the optimal level of risk for a particular type of transaction.

Optimum level - is, of course, a relative term, since it turns on the basis of subjective evaluations of experts, but nevertheless he comes of the boundaries of acceptable risk resulting from construction of the risk curve. It is quite obvious that for a bank seeking to not "drown" in market forces, acting with the utmost care, the value of the optimal level of risk is lower than for the bank, which is not very worried about the security of the transactions.

So that the optimal level of risk - a very specific question regarding the individual characteristics of each individual bank.

Now, rising one more level above trace (in terms of risk) as Samara AK Bank SB RF generally provides loans for the last two or three years. What measures are taken to reduce the likelihood of loss. Try to objectively assess and analyze the above-mentioned.

In the year 199 9 units Samara Bank Savings bank loans granted to individuals and legal entities totaling 9,203,935 thousand rubles ( in 1998 - 7,273,152) , including :

- Population ................................................ .. 789 933 thousand rubles,

- Businesses, organizations ................. 8,276,746 thousand,

- Banks ................................................ ........ 137 256 thousand rubles;

Issued to the population:

- Long-term loans .................................. 8835 thousand rubles,

- Loans for urgent needs ................... 224 530 thousand rubles.

In 1999, the loans granted in foreign currency amounting to 12,336 thousand U.S. dollars against 37,175 thousand U.S. dollars in 1998.

With the balance payable at the end of 1999 increased to 2,132,621 thousand compared to 1,089,759 thousand rubles at the beginning of the year or 34.4% , including:

- Population ..................................... c 89,780 to 101,762 thousand rubles,

- By businesses, organizations .... c 913,486 to 2,013,679 thousand rubles,

- On banks ........................................... c 86,493 to 17 180 thousand rubles.

Level of arrears amounted at the end of 1999 134 053 thousand rubles, compared with 103,924 thousand rubles at the beginning of the year, including:

- Population ..................................... 7 182 to 8 140 thousand rubles.

- By businesses, organizations .... with 56,636 to 124 848tys. rub.

- On banks ........................................... 40 106 to 1065 rubles.

Thus, credit debt on banks by 65 % reduces to overdue and his characterization is hopeless to recover. So, in 1999, managed to extinguish arrears formed in 1998 and losing to the collection, worth 403,300 rubles.

Dynamics of loans for 1999

Table number 3

thous .

Date	01.01.99	In%	01.04.99	In%	01.07.99	In%	01.10.99	In%	01.01.00	In%
Only	7273152	100	6836762	100	7520438	100	8648503	100	9203935	100
is including:
Population of	500,344	6	470,324	6	500,423	4	655,322	5	789,933	6
pre- acceptance	6273500	12	5897100	19	6700258	28	7791979	47	8276746	78
Banks	499,308	82	469,338	75	319,757	67	201 202	48	137,256	16
Past Chennai zadol- wives completely	1089759	14	1416686	14	1700023	13	2125028	15	2132621	9

From this table it is clear that for 199 years there was a 9 loan portfolio diversification in terms of loans companies and banks.

Win IBC Bank's loan portfolio for the year decreased from 82% to 16%, while the share of loans companies and organizations increased from 12% to 78%.

The share of loans to the population did not change significantly. Overdue loans increased from 14% to 9%.

Overdue receivables changed as follows from 1999 to 01/01/2000:

- ..................................... Population from 8.8% to 8.1% ,

- By businesses, organizations .... from 14.3% to 6.2%

In 1999, the continued influx of legal entities for cash management services to institutions Samara AK SB Bank of Russia, which led to a further increase in the share of loans granted to legal persons on cash service institutions Samara Security Bank of the Russian Federation with 68.7 % to 87.5 % of the total outstanding loans of legal entities.

The main reasons for the growth of arrears is:

1. Due to the severe financial condition of a number of industrial

enterprises and organizations in the city and region, borrowers working in these enterprises are not able to timely and fully pay off the bank.

2. Insufficient attention to the work of arrears on loans to the public.

In 1999. employees of credit, legal services and security measures have been taken, will significantly reduce the arrears, namely: