QUANTIFYING THE BANK RISKS – CREDITMETRICS CONCEPT
Journal Title: Acta Economica - Year 2011, Vol 9, Issue 14
Abstract
The paper investigates the internal methods of assessing exposure to credit risk and the possibility of implementing such methodologies in local conditions in order to effectively manage an equity position. The work underlines the internal system of determining the rating was introduced in order to encourage banks to further investments in internal systems of risk management, and the Basel Committee has found that the method of internal models of banks to assess credit risk more accurately determine the required level of capital each bank. Gives a brief overview of VAR‐Value at Risk method, a concept derived from the VAR as CreditMetrics empirically tested in local conditions. The assumption is that the concept CreditMetrics practical and useful method of quantifying risk, and is applicable in our conditions. There was a present value at risk portfolio of loans. It was pointed out that the Bank's credit exposure to protect the formation of capital and reserves more than cover the maximum expected loss at 99% confidence that it would provide the ability to reduce reserves to cover credit risk and marketing of these funds. Reduction in capital through the allocation of risks restricts funding for marketing and development banks, on the other hand reduces the profitability and its market value.
Authors and Affiliations
Радмила Чичковић
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