The main methods for assessing the creditworthiness of a borrower - an individual, used in Russian banks. Development of forms of lending to individuals in the Russian Federation Creditworthiness: what is it

home » Loans The main methods for assessing the creditworthiness of a borrower - an individual, used in Russian banks. Development of forms of lending to individuals in the Russian Federation Creditworthiness: what is it

Under the assessment of the credit risk of the borrower is usually understood as the study and evaluation of qualitative and quantitative indicators of the economic situation of the borrower. The work on assessing credit risk in a bank is carried out in three stages:

assessment of the quality indicators of the borrower's activities;

assessment of quantitative indicators of the borrower's activity;

obtaining a summary assessment - a forecast and the formation of a final analytical conclusion.

The assessment of the client's creditworthiness is carried out on the basis of an analysis aimed at identifying objective results and trends in its financial condition.

The main sources of information for assessing the borrower's credit risk are: information provided by the borrower, the experience of other banks with this client, the scheme of the transaction being credited, and on-site inspection data.

The reputation of the borrower is studied very carefully, while the analysis of the client's credit history, that is, the past experience with the client's loan debt, is very important. Information characterizing the business and personal qualities of an individual borrower is carefully studied. The facts or absence of facts of non-payments on loans, etc. are also established. Determining the borrower's creditworthiness is an integral part of the bank's work to determine the possibility of issuing a loan.

The analysis of the borrower's creditworthiness is understood as the assessment by the bank of the borrower in terms of the possibility and expediency of granting loans to him, determining the likelihood of their timely repayment in accordance with the loan agreement. To this end, various techniques and methods are used.

The analysis of the client's creditworthiness is based on the collection of the necessary information that most fully characterizes the client, the main objectives of the analysis of which are:

identifying the strengths of the applicant's situation;

identifying the weaknesses of a potential borrower;

determining which specific factors are most important for successful loan repayment;

possible risks in lending.

In banking practice, direct and indirect methods of analyzing the creditworthiness of customers are distinguished.

Direct methods are rarely used. They assume that the amount of points scored by the client is actually equal to the amount of the loan to which he is entitled.

Indirect methods are widely used. Their essence lies in giving certain weights (points) to various evaluation indicators, and the result of the evaluation is the derivation of the client's creditworthiness class.

Based on the data obtained, the creditworthiness group of a potential client is determined:

excellent borrower;

insolvent.

However, it is not enough to find out the borrower's creditworthiness class. It is also important to determine the amount and term of the loan to which he is entitled. For this, a table of allowable amounts for issuing consumer loans as a percentage of the client's annual income is used.

In the process of analyzing the individual creditworthiness of individuals, it is important to use the credit scoring method very carefully, since, especially when issuing long-term loans, the situation in the process of executing a loan agreement changes greatly and there may be a serious risk of default on the loan. If the total score exceeds the amount specified in the model, then the bank provides the borrower with a loan, if it is lower than the named amount, then the loan is denied. Usually there is a certain gap between the minimum and maximum scores, and when the actual number of points falls within this gap, the bank makes a lending decision based on general economic and legal factors.

Obviously, the use of scoring systems for assessing the creditworthiness of customers is a more objective and economically sound decision-making process than the use of expert assessments. The only difficulty lies in the fact that customer credit score systems must be statistically carefully verified, and they require constant updating of information, which can be disadvantageous for banks. According to the results of the analysis of creditworthiness, the more points the client scored, the higher the level of his creditworthiness.

When conducting a creditworthiness analysis, banks pay special attention to assessing the personal qualities of the borrower. They can request the necessary certificates, including from the place of work of the borrower, and check the accuracy of the information provided in the client's questionnaire. If the banker revealed inaccuracies in the client's answers and came to the conclusion that the potential borrower deliberately misled the bank, then the client automatically receives a refusal to grant him a loan.

Capital valuation refers to the determination of the client's wealth. It is closely related to assessing the financial capacity of the client in terms of his ability to repay the loan, along with normal day-to-day expenses and other debt obligations. For almost all consumer loans, the client's income is the main source of repayment. Therefore, the bank evaluates the sufficiency of the client's own funds for the timely repayment of the loan after the satisfaction of other claims and then compares this amount with the amount of periodic payments to repay the loan and interest on it.

Scoring systems allow reducing costs and minimizing operational risk by automating decision making, reducing the processing time for loan applications, enabling banks to conduct their credit policy centrally, and provide additional protection for financial institutions from fraud. At the same time, scoring also has a number of disadvantages: often the system's decision is based on the analysis of data provided exclusively by the borrower. In addition, scoring systems need to be constantly improved and maintained, since they take into account only past experience and react to changes in the socio-economic situation with a delay.

Credit scoring is a system for assessing the creditworthiness (credit risks) of a person based on accrued statistical methods. As a rule, it is used in consumer (store) express lending for small amounts. It is also possible to use it in the business of mobile operators, insurance companies, etc.

Data for scoring systems are obtained from the probabilities of loan repayments by individual groups of borrowers, obtained from the analysis of the credit history of thousands of people. It is believed that there is a correlation between certain social data (the presence of children, attitudes towards marriage, the presence of higher education) and the conscientiousness of the borrower.

Credit scoring is a simplified system for analyzing a borrower, which makes it possible to reduce the requirements for the qualification of a loan officer involved in reviewing loan applications and increase the speed of their consideration.

When lending to individuals, a procedure for assessing their creditworthiness is also carried out, which can be carried out on the basis of the borrower's income level, a study of his credit history, as well as a standardized scoring.

The borrower's creditworthiness is assessed by income level based on data on the individual's income and the degree of risk of losing this income. Income is determined on the basis of salary certificates or a tax return, after which it is adjusted to take into account mandatory payments and bank risk ratios.

Introduction

The problem of timely repayment of loans issued to individuals is relevant for most banking institutions. Its solution largely depends on the quality of assessing the creditworthiness of potential borrowers.

In this regard, careful selection of borrowers, analysis of the conditions for issuing a loan, constant monitoring of the financial condition of the borrower, the ability to repay the loan, are one of the fundamental components of the financial well-being of credit institutions.

The analysis of creditworthiness in a large number of banks is carried out by experts who rely mainly on their experience and intuition, which can lead to the introduction of subjective considerations without sufficient grounds into the decision. In a real situation, analysts' opinions often differ, especially when controversial issues are discussed that have many alternative solutions.

The situation becomes more complicated if the credit institution lacks regulatory documents regulating the procedure for determining the client's ability and intentions to fulfill the terms of the debt repayment agreement. As a result, subjective factors acquire excessive weight in the assessment: the qualification and interest of the expert and the resulting incompetent or deliberate interpretation of information, leading to decisions that are detrimental to the bank. The absence of regulations and formalization of the procedure leads to the impossibility of subsequent analysis and reasonable assessment of the decisions of experts.

When developing methods for assessing the level of creditworthiness of individuals, an approach based on the calculation of the borrower's rating has become widespread. The basis of this approach is the initial questionnaire, the data of which reflect the socio-economic situation and the client's ability to repay the loan in a timely manner. In this case, the scoring system performs quantitative, semantic analysis and processing of the questionnaire data.

Making changes to the questionnaire entails the need for adjustment or significant modernization of the entire system. This circumstance limits the possibility of adapting scoring models to the socio-economic conditions of the region where the banking structure plans to lend to private clients, as well as to changes in the current economic situation. Therefore, this approach does not allow the development of a universal system for automated analysis of creditworthiness.

All of the above confirms the relevance of the topic of the course work.

The object of the study is the activity of JSC "RGS Bank".

The subject is the procedure for assessing the creditworthiness of individuals.

The purpose of this course work is to study the procedure for assessing the creditworthiness of an individual.

To achieve this goal, the following tasks should be solved:

1) get acquainted with the economic content of the concept of creditworthiness;

) study the methodological basis for assessing the creditworthiness of individuals;

) analyze methods for assessing the creditworthiness of individuals;

) to consider the possibility of modernizing the process of assessing the creditworthiness of an individual.

) fulfillment of a practical task under the credit program "Your conditions" of JSC "RGS Bank".

1. Methodological bases for assessing the creditworthiness of individuals

1 Economic content of creditworthiness

In the context of the transition to market relations, economic approaches to lending are changing. An important criterion for granting loans is the creditworthiness of the borrower.

Under the creditworthiness of the borrower, it is customary to understand the ability to repay the loan debt. Its assessment is an assessment by the bank of the borrower in terms of the possibility and expediency of granting him a loan. It determines the probability of timely return and payment of interest.

The definition of this concept does not indicate what kind of debt is meant, for what type of loan and for how long. The definition is quite universal, but in real banking practice, the creditworthiness of an enterprise is usually understood as its ability to repay a loan debt on a short-term or long-term loan.

The study of creditworthiness is carried out for a qualitative assessment of the borrower before resolving the issue of issuing a loan and its conditions, determining the ability and readiness of the client to return the funds borrowed by him in accordance with the loan agreement.

The study by banks of various factors that may lead to non-repayment of loans, or, on the contrary, ensure their timely repayment, is the content of the banking analysis of creditworthiness.

When analyzing creditworthiness, banks must decide the following questions: is the borrower able to fulfill his obligations on time, is he ready to fulfill them?

The main purpose of such an analysis is to determine the ability and willingness of the borrower to return the requested loan in accordance with the terms of the loan agreement. The bank must in each case determine the degree of risk it is willing to take on and the amount of credit that can be extended in the circumstances.

The borrower submits a loan application to the bank.

The loan application contains the following basic information:

brief description of the borrower;

the purpose of the loan;

information about the activities of the borrower;

loan amount;

credit term;

alleged collateral;

sources of loan repayment;

Contact Information;

passport data;

registration address;

Based on the data received, the bank evaluates the potential borrower.

One way to evaluate is scoring.

In Russia, commercial banks use different models of scoring assessments of the creditworthiness of an individual. When evaluating the scores of the system of individual indicators, at the first stage, a preliminary assessment of the possibility of issuing a loan is given, based on the data of the test-questionnaire of the client. Based on the results of filling out the test-questionnaire, the number of points scored by the borrower is determined and the protocol for evaluating the possibility of obtaining a loan is signed. If the sum of points is less than 30, the refusal to issue a loan is recorded in the protocol. With a score of more than 30, the risk is assessed more carefully in the second stage, taking into account additional facts.

The need to use indicators follows from the definitions of the use of one or another chosen method of accounting policy:

when lending to individuals, small amounts of loans are characteristic, which gives rise to a large amount of work on their registration and a rather expensive risk; 0 - for a profession with a high risk, 0.16 - other professions;

financial indicators: having a bank account - 0.45, having real estate - 0.35; availability of an insurance policy - 0.19;

work: 0.21 - enterprises in the public sector, 0 - others;

employment: 0.059 - for each year of work at this enterprise. .

The threshold is also determined, having crossed which, a person was considered to be given or not to give a loan. Such tasks are solved with great success by one of the Data Mining methods - with the help of decision trees. Decision trees are one of the methods of a sequential structure, where each object corresponds to a single node that gives a solution.

Based on the data for past periods, a tree is built. In this case, the class of each of the situations on the basis of which the tree is built is known in advance, i.e. it must be known whether they are in the same node or not. The entropy is zero if the node contains objects belonging to the same class.

The resulting model is used to determine the class (Give/Not give a loan) of newly arisen situations (an application for a loan has been received).

With a significant change in the current situation on the market, the tree can be rebuilt in case of overdue debts. On this basis, a credit history is compiled.

In Russia, the maintenance of borrowers' credit histories is regulated by Federal Law No. 281-FZ "On Credit Histories", which determines the conditions for the provision of credit reports and related services.

The Credit Conditions Bureau collects, processes and disseminates information related to the credit history of borrowers of individuals, information from state authorities, local governments and the Bank of Russia in order to verify information included in credit histories.

Credit history is information that characterizes the fulfillment by the borrower of the obligations assumed under loan (credit) agreements and is stored in the credit history bureau.

A credit history bureau is a legal entity registered in accordance with the legislation of the Russian Federation, which is a commercial organization and provides services for the formation, processing and storage of credit histories, as well as for the provision of credit reports and related services.

2 Methods for assessing the creditworthiness of individuals

The assessment of the client's creditworthiness is carried out on the basis of an analysis aimed at identifying objective results and trends in its financial condition.

Qualitative analysis is also implemented in stages, as shown in Figure 1.

assessment of the borrower's risks assumed by the bank

Figure 1 - Stages of qualitative analysis

The analysis of the client's creditworthiness is based on the collection of the necessary information that most fully characterizes the client, the main objectives of the analysis of which are:

identifying the strengths of the applicant's situation;

identifying the weaknesses of a potential borrower;

determining which specific factors are most important for successful loan repayment;

possible risks in lending.

In banking practice, direct and indirect methods of analyzing the creditworthiness of customers are distinguished.

Direct methods are rarely used. They assume that the amount of points scored by the client is actually equal to the amount of the loan to which he is entitled.

Based on the data obtained, the creditworthiness group of a potential client is determined:

excellent borrower;

insolvent.

Scoring

<#"732999.files/image001.gif">

Figure 2 - An example of a decision tree

The essence of this method is as follows:

1) based on data for past periods, a tree is built. In this case, the class of each of the situations on the basis of which the tree is built is known in advance. In our case, it must be known whether the principal amount and interest were returned and whether there were any delays in payments. When constructing a tree, all known situations of the training sample first fall into the upper node, and then are distributed among the nodes, which in turn can also be divided into child nodes. The partition criterion is different values of some input factor. To determine the field on which the partition will occur, an indicator called entropy is used. - measure of uncertainty . The field is selected, when splitting over which more uncertainty is eliminated. The higher the uncertainty, the more impurities (objects belonging to different classes) are in one node. The entropy is equal to zero if the node contains objects belonging to the same class;

) the resulting model is used to determine the class (give/not give a loan) of newly arisen situations (an application for a loan has been received);

) with a significant change in the current market situation, the tree can be rebuilt, i.e. adapt to the existing situation.

The study of methods for assessing the creditworthiness of individuals makes it possible to highlight the same problems that need to be addressed at the macro level:

the absence of special legislation regulating relations in the field of consumer lending (these relations are regulated by the laws "On Banks and Banking Activity" and "On Protection of Consumer Rights");

lack of a system of credit histories (which allows unscrupulous borrowers to obtain several loans from different banks without any verification of their previous loans);

employers still prefer "gray" schemes for paying remuneration to their employees (as a result, the borrower cannot officially confirm the declared level of income, and the bank loses a solvent client);

the lack of a simple mechanism for the bank to repay the loan in case of insolvency of the borrower (the cost of such errors is very high: loss of the principal amount of the debt, legal and administrative costs, lost time, etc.);

the need for a reliable assessment of a potential borrower (incorrect classification gives rise to the problem of ensuring the return of funds by the borrower in a forced manner);

the lack of registration of pledged property opens up the opportunity for unscrupulous borrowers to sell or re-mortgage the pledged property;

the problem of assessing the real possibilities of guarantors (it is no secret that Russian banks sometimes solve the issue of reducing credit risks by simply transferring them to the borrower's guarantors).

As you can see, today banks are in an unfavorable position: they need to master the consumer lending market, but this process is associated with too high risks, which are often shifted to borrowers, which does not stimulate demand for loans. In such a situation, banks that decide to develop this market should:

have consolidated information about clients, presented in a unified form and periodically updated using information from all branches of the bank (such a repository will serve as a credit bureau);

adapt the borrower classification model to its branches, which will take into account territorial features and contribute to additional risk reduction. At the same time, the risk classification model should be periodically rebuilt taking into account new market trends.

Banks have their own developments for the development of lending to individuals, but the methods underlying them are too passive to adequately respond to market dynamics, and the proposed foreign solutions are too expensive - comparable in price to income from consumer lending in its current form. That is why loans are so expensive and the demand for them is not significant. Increasing the reliability of information and reducing the cost of loans will allow abandoning the practice of transferring risks and costs to borrowers. Then everyone will benefit: both banks and borrowers.

credit scoring risk borrower

2. Practical part

Ivan Borisovich Shevchenko applied to RGS Bank OJSC with a request for a consumer loan for the repair of an apartment in the amount of 250,000 rubles for a period of 36 months.

After consulting with a bank specialist, he was offered the loan program "Your conditions", the parameters of which are given in table 1.

Table 1 - Characteristics of the loan program "Your conditions"

Options	Meaning
Loan amount, rub
Loan term, months
Interest rate % per annum
Security	not secured
Repayment method	Annuity payments
Delivery method	To a bank card
Purpose of the loan	Apartment renovation
Loan currency
Borrower's documents for granting a loan
Special conditions	payroll client
Conditions for early repayment

After filling out the questionnaire by the borrower and providing all the necessary documents, the decision to issue a loan at a rate of 14 percent per annum was approved.

Loan repayment and interest payment by annuity payments. The loan is granted by crediting to the deposit opened in the bank ... with the issuance of a bank card.

Full early repayment is carried out on the date declared by the client, partial early repayment is allowed on the date declared by the client.

No deposit is required and there is no program fee.

1) give a complete description of the loan;

2) list the documents required for granting a loan

) fill out the borrower's questionnaire;

) draw up a loan agreement;

) calculate the payment repayment schedule;

) make accounting entries for issuing a loan, creating a reserve, accruing interest, receiving (making) the first, second payment at the bank’s cash desk (through the terminal), the third payment through a card of another bank.

Table 2 - Full characteristics of the loan

Classification sign	Loan type
By deadline	long term
By the nature of the collateral	not secured
By delivery technique	One amount
By the nature of the interest rate	Fixed
Method of interest payment	Annuity payments
By loan currency	In national currency
By number of creditors	One bank
By type of borrower	For an individual
By size
In the form of a loan	In non-cash form

Table 3 - Payment repayment schedule

Amount of credit
Rate, % per annum
Loan term, months
Date of issue of the loan
Payment number	Month year	payment date	Annuity payment
				To pay off a debt	In paying interest	Remaining debt after payment

	1st year 1st month
	1st year 2nd month
	1st year 3rd month
	1st year 4th month
	1st year 5th month
	1st year 6th month
	1st year 7th month
	1st year 8th month
	1st year 9th month
	1st year 10th month
	1st year 11th month
	1st year 12th month
	2nd year 1st month
	2nd year 2nd month
	2nd year 3rd month
	2nd year 4th month
	2nd year 5th month
	2nd year 6th month
	2nd year 7th month
	2nd year 8th month
	2nd year 9th month
	2nd year 10th month
	2nd year 11th month
	2nd year 12th month
	3rd year 1st month
	3rd year 2nd month
	3rd year 3rd month
	3rd year 4th month
	3rd year 5th month
	3rd year 6th month
	3rd year 7th month
	3rd year 8th month
	3rd year 9th month
	3rd year 10th month
	3rd year 11th month
	3rd year 12th month
	4th year 1st month

Table 4 - Payment repayment schedule of the 1st and 2nd order by terms of interest crediting

maturity date	Total payments	Amortization	Interest

			from 20.01 to 31.01	from 01.02 to 20.02

			from 21.02 to 28.02	from 01.03 to 20.03

Table 5 - Journal of business transactions



Under the loan agreement, a loan was granted with the opening of a deposit t/s 40817810500160455187 s/s 45506810300160123405 s/s 42301810400160341120
Provision for possible losses on loans (RVPS) 1%
Loan issued from deposit
Interest accrued for 11 days of January

Withdrawn from deposit account:
	1054-8 1917-8 5572-40	40817 40817 40817	47427 70601 45506
Interest accrued for 7 days of February

Repayment of the deposit account from the current account
	1054,8 1917-8 5 919-91	40817 40817 40817	47427 70601 45506
Interest accrued for 10 days of March
Adjustment of the amount of RVPS (recovery) is carried out on a monthly basis to repay the debt

Conclusion

The assessment of the borrower's creditworthiness and the decision to issue a loan, based on the obtained values, is one of the ways to reduce the risk of bank lending.

One of the main tasks solved by a commercial bank in the process of lending to borrowers is the formation of a complete and reliable information base. It serves as the main source of information when analyzing the borrower's creditworthiness.

The analysis of the creditworthiness of borrowers - individuals is based on the consideration of such indicators as:

the amount of initial capital;

the amount of income of the borrower and his family members;

balance of income and expenses of the borrower's family.

The main task of determining the creditworthiness of an individual borrower is to study its financial situation.

Creditworthiness is a complex legal and financial characteristic of a borrower, represented by financial and non-financial indicators, which makes it possible to assess its ability in the future to fully and within the time period specified in the loan agreement to pay off its debt obligations to the creditor, as well as determining the degree of bank risk when lending to a particular borrower .

The work on assessing credit risk in a bank is carried out in three stages:

) assessment of qualitative indicators of the borrower's activities;

) assessment of quantitative indicators of the borrower's activity;

) obtaining a summary assessment - a forecast and the formation of a final analytical conclusion.

The study of issues related to the analysis of the creditworthiness of borrowers of a commercial bank allows us to conclude that the methods of analyzing the creditworthiness of individuals are based on generally accepted criteria: the nature of the client, the ability to borrow funds, the ability to earn funds to repay the debt in the course of current activities, the security of the loan, the legal capacity of the borrower. All these criteria determine the methods for assessing the creditworthiness of bank customers.

Scoring - used by banks customer evaluation system based on statistical methods. As a rule, this is a computer program where the data of a potential borrower is entered. . In response, the result is given - is it worth giving him a loan . The name scoring comes from the English word score, that is, "score".

The purpose of this course work was to study the procedure for assessing the creditworthiness of an individual.

In this work, the following tasks were solved:

1) the economic content of the concept of creditworthiness is considered;

) the methodological foundations for assessing the creditworthiness of individuals have been studied;

) analyzed methods for assessing the creditworthiness of individuals;

) the possibility of modernizing the process of assessing the creditworthiness of an individual was considered.

Thus, we can conclude that well-designed, tested and implemented methods for assessing creditworthiness have a positive impact on the credit process organized by the bank as a whole.

JSC "RGS Bank" implements the loan program "Your conditions", when applying to the borrower's bank for a loan in the amount of 250,000 rubles for 36 months, a decision was made to issue a loan. The compiled schedule of annuity payments showed that the final repayment amount will be 307,490 rubles 30 kopecks, including interest of 57,490 rubles 30 kopecks.

Bibliography

1. Federal Law of the Russian Federation of July 10, 2002 No. 86-FZ “On the Central Bank of the Russian Federation (Bank of Russia)” (current version)

Federal Law "On Banks and Banking Activities" dated December 2, 1990 No. 395-1 (current version)

Endovitsky D.A., Bocharova I.V. Analysis and assessment of the creditworthiness of the borrower. - "KnoRus", 2008.

Kushuev A.A. Solvency and liquidity indicators in assessing the borrower's creditworthiness // Money and Credit, No. 11, 2008. P. 43-45.

5. O.I. Pyatkovsky, D.V. Lepchugov, V.V. Bondarenko. Scoring system for assessing the creditworthiness of individuals based on hybrid expert systems, Polzunovskiy Almanac No. 2, 2010, pp. 127-129.

When lending to individuals, small sizes of loans are typical, which gives rise to a large amount of work on their registration and a rather expensive procedure for assessing creditworthiness in relation to the resulting profit. In this case, credit risk consists of the risk of non-repayment of the principal amount of the debt and interest on this amount.

To assess the creditworthiness of individuals, the bank needs to assess both the financial position of the borrower and his personal qualities. At the same time, qualitative and quantitative indicators of the economic situation of the borrower are assessed. The assessment should be carried out in three stages:

1) assessment of the quality indicators of the borrower's activities;
2) assessment of quantitative indicators of the borrower's activities;
3) obtaining a summary assessment - a forecast and the formation of a final analytical conclusion.

An assessment of the creditworthiness of an individual is carried out on the basis of an analysis aimed at identifying objective results and trends in its financial condition. The main sources of information for assessing the creditworthiness of the borrower are: financial statements, information provided by the borrower, the experience of other persons with this client, the scheme of the credited transaction with a feasibility study for obtaining a loan, on-site inspection data.

Qualitative analysis is also implemented in stages:

2) determination of the purpose of the loan;

Determining the borrower's creditworthiness is an integral part of the bank's work to determine the possibility of issuing a loan. The analysis of the borrower's creditworthiness is understood as the assessment by the bank of the borrower in terms of the possibility and expediency of granting loans to him, determining the likelihood of their timely repayment in accordance with the loan agreement. For this purpose, use:

- financial ratios;
- cash flow analysis;
- business risk assessment.

The basis of the analysis of the creditworthiness of an individual is the collection of the necessary information that most fully characterizes the client, the main objectives of the analysis of which are:

1) identifying the strengths of the applicant's situation;
2) identifying the weaknesses of a potential borrower;
3) determining which specific factors are most important for the continued success of the borrower;
4) possible risks in lending.

Loan officers' analysis of clients' financial statements takes two forms: internal and external. External analysis consists of comparing a given borrower with others. Internal analysis involves comparing different parts of the financial statements with each other over a period of time over time.

Internal analysis is often referred to as ratio analysis. Although important to the analytical process, financial ratios have two drawbacks:

1) they do not provide information about how the client's operations are proceeding;
2) present outdated information.

Therefore, a bank analyst has to work not only with actual data, but also with an assessment of “complex” information (views, estimates, etc.).

In most Western countries, the analysis of the creditworthiness of individuals is carried out in the following areas:

1) Personal capacity - personal qualities of a potential borrower (honesty, seriousness of intentions, characterization as a good employee, etc.).
2) Revenues - client's income, analysis of the total family income. At the same time, it is considered that the client's expenses for loan repayment should not exceed one third of the client's monthly income.
3) Material capacity - loan security, including analysis of the client's movable and immovable property.

However, a more comprehensive analysis is often required, for example, based on an assessment of the borrower's cash flow, that is, in the cash flow analysis process. Cash flow is a measure of a borrower's ability to cover their expenses and repay debt with their own resources. Compiling a cash flow statement allows you to answer the following questions:

- whether the borrower provides himself with funds for further growth of financial assets;
- whether the growth of the borrower is so rapid that it requires financing from external sources;
- whether the borrower has excess funds to use them to repay the debt or subsequent investment.

It is advisable to use this form of the borrower's cash flow statement to analyze the prospects for repayment of the loan. The initial information for assessing the client's creditworthiness is a special section of the loan application - "Calculation of monthly income" (table 1.1.)

Table 1.1. - Calculation of the monthly income of an individual

By checking the client's disposable income in this way and comparing it with the monthly debt service amount (principal and interest), the bank can easily determine the client's solvency. If the amount of debt service exceeds the amount of disposable income, then the client's application is rejected. The solvency of a potential borrower is assessed by the bank as good if the debt service amount is less than 60% of its current expenses.

It is also necessary to assess the reputation of the borrower. One of the possible methods of its assessment is the method of credit scoring. The scoring model is usually developed by each bank independently based on the characteristics of the bank and its clientele. The essence of this technique is that each factor characterizing the borrower has its own quantitative assessment. Summing up the points obtained, you can get an assessment of the creditworthiness of an individual. Each parameter has a maximum possible threshold, which is higher for important questions and lower for secondary ones.

The scoring method allows you to conduct an express analysis of a loan application in the presence of a client. For example, in French banks, a client who applied for a personal loan and filled out a questionnaire can receive a response from the banker about the possibility of providing a loan within a few minutes.

Most American banks use in their practice:

1) systems for assessing the creditworthiness of customers based on expert assessments of the analysis of the economic feasibility of granting a loan;
2) scoring systems for assessing the creditworthiness of customers.

By using peer-reviewed customer credit scoring systems, banks rely on a general economic approach when analyzing a customer's creditworthiness. Banks analyze the information in the light of the main banking requirements and then decide whether to grant a loan or refuse to issue it. This approach to the analysis of the client's creditworthiness is a weighted assessment of the personal qualities and financial condition of the borrower.

The use of a quantitative assessment of the client's creditworthiness involves assigning a certain group to one or another type of loan, one or another type of borrower and determines in points the value of various characteristics of a potential borrower. The banker then simply calculates the total score and compares it to the loan or rejection model.

Scoring systems are created by banks based on an empirical approach using regression mathematical analysis or factor analysis. These systems use historical data on bank "good", "safe" and "bad" loans and allow you to determine the criteria level of borrower evaluation.

In banking practice, direct and indirect methods of analyzing the creditworthiness of customers are distinguished.

Direct methods are rarely used. They assume that the amount of points scored by the client is actually equal to the amount of the loan to which he is entitled.

Based on the data obtained, a potential client's creditworthiness group is determined: an excellent borrower; good; average; bad; insolvent. However, it is not enough to find out the borrower's creditworthiness class. It is also important to determine the amount and term of the loan to which he is entitled. For this, a table of allowable amounts for issuing consumer loans as a percentage of the client's annual income is used.

If the total score exceeds the amount specified in the model, then the bank provides the borrower with a loan, if it is lower than the named amount, then the loan is denied. Usually there is a certain gap between the minimum and maximum scores, and when the actual number of points falls within this gap, the bank makes a lending decision based on general economic and legal factors.

There are many methods of credit scoring known today. One of the most famous is the Durand model. Duran identified a group of factors that make it possible to determine the degree of credit risk as much as possible. He also determined the coefficients for various factors characterizing the creditworthiness of an individual:

- gender: female (0.40), male (0);
- age: 0.1 point for each year over 20 years, but not more than 0.30;
- period of residence in the area: 0.042 for each year, but not more than 0.42;
- profession: 0.55 - for a profession with low risk; 0 - for a profession with a high risk; 0.16 - other professions;
- financial indicators: having a bank account - 0.45; availability of real estate - 0.35; availability of an insurance policy - 0.19;
- work: 0.21 - enterprises in the public sector, 0 - others;
- employment: 0.059 - for each year of work at the given enterprise;

He also determined the threshold, having passed which, a person was considered creditworthy. This threshold is equal to 1.25, i.e. if the accumulated score is greater than or equal to 1.25, then the potential borrower is given the amount requested by him.

A significant drawback of the scoring system for assessing the creditworthiness of individuals is that it is very poorly adaptable. And the system used to assess creditworthiness should correspond to the present state of affairs. For example, in the USA it is considered a plus if a person has changed many jobs, which indicated that he was in demand. In the USSR, on the contrary, this circumstance indicated that a person either could not get along with the team, or was a low-value specialist, and, accordingly, the likelihood of delays in payments increased. Another example of the difference in weight coefficients is that if in the USSR the presence of a personal car indicated a good financial situation of the borrower, now this presence practically does not mean anything. Thus, it is absolutely necessary to adapt the model both for different periods of time, and for different countries and even for different regions of the country.

Thus, there are two main disadvantages of the scoring system for assessing the creditworthiness of individuals:

1) the high cost of adapting the model used to the current state of affairs;
2) a high probability of a model error in determining the creditworthiness of a potential borrower, due to the subjective opinion of a specialist.

To adapt the scoring model for assessing the creditworthiness of individuals, it is necessary to determine a set of factors with weighting coefficients plus a certain threshold (value), overcoming which a person applying for a loan is considered able to repay the requested loan and interest. However, the results obtained will be mostly subjective opinion and, as a rule, poorly supported by statistics (statistically unfounded). As a consequence of all this, the resulting model does not fully correspond to the current reality. The financial result of this approach will be that in the interest rate of lending offered by the bank, a large share will be occupied by the part that covers the risk of non-payments.

Thus, the use of scoring systems for assessing the creditworthiness of customers is a more objective and economically sound decision-making process than the use of expert assessments. The only difficulty is that customer credit score systems must be statistically carefully verified and require constant updating of information, which can be disadvantageous for banks. According to the results of the analysis of creditworthiness, the more points the client scored, the higher the level of his creditworthiness.

The coefficient method is a more detailed analysis of the economic condition of the borrower. Therefore, bankers around the world pay special attention to the analysis of financial ratios, for example, indicators of liquidity, turnover of funds, equity, profitability or on the basis of cash flow, as a result of which the borrower's credit rating and rating are determined.

To determine the amount of adequate credit risk coverage for consumer loans, it is advisable to calculate special indicators, coefficients that characterize the minimum amount of payments to repay the loan and the maximum allowable amount of debt in relation to the client's income:

K1 = Min / D, (1)

where Min - the minimum amount of payments to repay the loan

D - client's income

K2 = Max / D, (2)

where Max is the maximum allowable amount of debt

Using such coefficients, the banker evaluates: the correspondence of the amount of income indicated in the questionnaire to the amount of the actual income of the client, the stability of the sources of income and determines the conditions for repaying the loan, taking into account the possibility of the borrower losing part of the income due to a decrease in overall business activity or a decrease in the competitiveness of this type of business, etc. .d.

Conclusion to subchapter 1.3: Summarizing the above, the analysis of the creditworthiness of an individual is to determine the prospects for repayment of the amount of debt by the client on time and without additional costs on the part of the bank.

Conclusion to chapter I: Based on the results of studying the theoretical foundations for assessing the borrower's creditworthiness, the following conclusions can be drawn:

1) Credit policy is the definition of the directions of the bank's activities in the field of credit and investment operations and the development of lending procedures that ensure risk reduction. The development of a competent credit policy is the most important element of banking management. The essence of the bank's credit policy is to ensure the safety, reliability and profitability of credit operations, that is, the ability to minimize credit risk.

2) Banking risk is the risk to which commercial banks are exposed. Credit risk is very significant for banks. It represents the risk for the lender that the borrower will not pay the principal and interest on it. The most common measure in the practice of banks aimed at reducing credit risk is the assessment of the borrower's creditworthiness.

3) An assessment by a bank of the creditworthiness of a borrower - an individual means an analysis of the possibility and expediency of providing funds to the borrower, determining the likelihood of their return in a timely manner and in full. The scoring system for evaluating potential borrowers is considered the most effective. It assumes the presence of at least three sections: information on the loan, information about the client, the financial situation of the client. Thus, the assessment of the creditworthiness of an individual is carried out on the basis of an analysis that is aimed at identifying objective results and trends in its financial condition. The main sources of information for assessing the creditworthiness of the borrower are: financial statements, information provided by the borrower, the experience of other persons with this client, the scheme of the credited transaction with a feasibility study for obtaining a loan, on-site inspection data. Qualitative analysis is also implemented in stages:

1) studying the reputation of the borrower;
2) determination of the purpose of the loan;
3) determination of the sources of repayment of the principal debt and interest due;
4) assessment of the borrower's risks assumed by the bank.

The reputation of the borrower is studied very carefully, while the analysis of the client's credit history, that is, past experience, is very important.

Russian citizens are increasingly taking out loans for consumer needs - the purchase of household appliances, the purchase of durable goods, take out loans to purchase a car and an apartment, open credit cards, etc.

The volume of the credit market is constantly growing, and at a fairly rapid pace. But, recently, with an increase in the number of loans issued, there has been an increase in unreliable borrowers.

In modern conditions, the task of analyzing, assessing and managing credit risk is one of the priorities for credit institutions not only in Russia, but also in other countries of the world.

The requirements for the reliability of the banking system imposed by various regulatory bodies are constantly increasing, the terms of lending are increasing, and the share of transactions, the success of which is directly related to the economic situation of borrowers, is growing.

All of this is happening against a background of intensifying competition, in which lenders cannot simply increase interest rates or require additional collateral on loans to cover their risks.

In order for the work in the private lending market to be successful and bring financial returns, an effective risk assessment system is needed that would allow pre-cutting unreliable borrowers, and at the same time not refusing reliable ones; a system that reasonably determines the down payment on a consumer loan or credit card limit.

The assessment of the creditworthiness of an individual is based on the ratio of the requested loan and his personal income, the general assessment of the financial situation of the borrower and the value of his property, family composition, personal characteristics, the study of credit history. There are the following methods for assessing the creditworthiness of an individual:

1. Scoring.

2. Study of credit history.

3. Evaluation by financial indicators of solvency.

4. Underwriting.

The scoring system allows you to dramatically increase the volume of sales of bank loan products by reducing the time for checking a loan application and individually setting loan parameters for each borrower.

When scoring, a system of criteria and the corresponding indicators of the borrower's ability to repay the bank's principal and interest are determined, the indicators are evaluated in points within the maximum set by the bank, and the overall score of creditworthiness.

The advantages of scoring models include:

1. Reducing the level of loan default, speed and impartiality of decision-making.

2. Ability to effectively manage the loan portfolio.

3. Lack of long-term training for the employees of the credit department.

4. The ability to conduct an express analysis of the loan application in the presence of the client.

The disadvantages of the scoring model are:

1. The evaluation characteristics are determined only on the basis of information about those clients to whom the bank has already provided a loan.

2. Scoring models are built on the basis of a sample of the most "early" clients. Given this, bank employees have to periodically check the quality of the system and, when it deteriorates, develop a new model.

The solution methodology is based on the analysis of the specifics of the bank's activities. This takes into account both client groups (industry and regional affiliation, etc.), as well as bank loan products for individuals.

Based on the needs of the bank in business development and the available data, scoring models can be built based on the expert knowledge of banking management, on statistical data, taking into account macroeconomic data on the socio-economic development of specific regions and industries.

The second method for assessing the creditworthiness of an individual is to study his credit history.

In order for banks to receive information about the credit history of an individual in Russia, on the initiative of commercial banks, they created the Bureau of Credit Histories.

Credit bureaus hold the following types of data:

1. Socio-demographic characteristics.

2. Judicial decisions (in case of transfer of cases on claiming debt on a loan to the court).

3. Information about bankruptcies.

4. Data on individual borrowers received from credit institutions on the principle "you - to me, I - to you", i.e. the bank can receive information about the clients of other banks only if it itself supplies similar information.

The scope and nature of the information held by the bureau is strictly regulated by the laws of each country.

The importance of credit bureaus is extremely high, their existence allows credit organizations to issue loans to clients who were not previously served by this organization. In addition, the value of previous credit history in predicting the probability of default is generally recognized.

The third method for assessing the creditworthiness of an individual is based on the calculation of financial indicators. Solvency indicators are based on data on the income of an individual and the degree of risk of losing this income.

This technique has its pros and cons, but it can be used to determine the creditworthiness of a potential borrower with a sufficient degree of accuracy.

The disadvantages of this technique include the fact that the bank takes into account the total income of the family only in exceptional cases, which significantly narrows the circle of potential borrowers. The undoubted advantage of this technique can be considered the presence of specially developed formulas and correction factors that facilitate the work of loan officers and give a clear idea of the creditworthiness of a potential borrower.

The obligation to provide an income statement, on the one hand, limits the range of potential borrowers of a bank using this method, while some other banks do not require official confirmation of income in order to obtain a consumer loan, and on the other hand, it allows you to create a loan portfolio of a higher quality and reduce credit risk, which is a plus of this technique.

Borrower underwriting is the main way to reduce the bank's credit risk in mortgage lending to individuals, in which the likelihood of loan repayment is assessed, which involves an analysis of the potential client's solvency in the manner established by the bank, as well as making a positive decision on an application for a mortgage loan or refusing to provide a loan .

A fairly wide range of banking departments are involved in mortgage lending to individuals in the bank: the legal service, the security service, the securities department, the housing construction department, etc. This indicates the degree of complexity and laboriousness of the underwriting procedure, the course of which each bank develops independently, choosing criteria assessments and conditions for granting mortgage loans.

The most important point in the underwriting process is the assessment of the client's solvency in terms of the ability to make timely payments on the loan. To perform this assessment, information is consolidated on employment and the receipt of income by the borrower, as well as on its expenses.

After that, it is concluded whether he will be able to repay the loan. At the same time, an opinion is issued whether the pledged property is sufficient security for granting a loan or not.

Evaluating the underwriting methodology, we can conclude that a systematic approach to the analysis of the borrower is applied here.

The positive side of the methodology is the ability of the bank to develop an individual approach to any potential borrower, within which the required number of characteristics will be taken into account.

The disadvantage of this assessment is the laboriousness of its implementation, which requires special qualifications of bank employees.

All of the above methods are used by Russian banks and are constantly being improved.

The assessment of the borrower's creditworthiness and the decision to issue a loan, based on the obtained values, is one of the ways to reduce the risk of bank lending.

Thus, we can conclude that well-designed, tested and implemented methods for assessing creditworthiness have a positive impact on the credit process organized by the bank as a whole.

Bibliography

1. Analysis and assessment of the borrower's creditworthiness: educational and practical manual / D.A. Endovitsky, I.V. Bocharov. M.: KNORUS, 2014. 272 p.

2. Arkhipov A.P. Insurance underwriting. 2nd edition. Textbook and workshop, 2014. 359 p.

3. Pyatkovsky O.I., Lepchugov D.V., Bondarenko V.V. Scoring system for assessing the creditworthiness of individuals based on hybrid expert systems, Polzunovskiy Almanac No. 2, 2010, pp. 127-129.

4. Reference and legal system "Consultant Plus" [Electronic resource]. URL: http://www.consultant.ru (date of access: 11/18/2017).

The paper discusses the concept, essence and necessity of assessing creditworthiness. An analysis is made of existing methods for assessing the creditworthiness of individuals, problems and improving the assessment of creditworthiness. Calculation of the possibilities of the borrower.

Send your good work in the knowledge base is simple. Use the form below

Students, graduate students, young scientists who use the knowledge base in their studies and work will be very grateful to you.

Hosted on Allbest.ru

State budgetary professional educational institution college Tsaritsino

Course work

discipline "Organization of credit work"

on the topic: "Assessment of the creditworthiness of the borrower (individual)"

Student: Demir Deniz

Speciality: Banking

Teacher: Karpova Elena

Alexandrovna

MOSKWA 2014

Introduction

Chapter 1. The concept of creditworthiness

1.1 The essence and necessity of assessing creditworthiness

1.2. Information required to calculate the borrower's creditworthiness

Chapter 2. Analysis of existing methods for assessing the creditworthiness of individuals

2.1. Foreign experience in assessing the creditworthiness of individuals

2.2. Russian practice of assessing the creditworthiness of individuals

Chapter 3. Problems and improvements in creditworthiness assessment

3.1. Problems of assessing the creditworthiness of individuals

3.2. Improving the assessment of the creditworthiness of individuals

Conclusions and conclusion

Bibliographic list

Appendix

Introduction

Banks are an integral feature of the modern money economy, their activities are closely related to the needs of reproduction. Being at the center of economic life, serving the interests of producers, banks mediate links between industry and trade, agriculture and the population.

Banks are not an attribute of a single economic region or any one country, the scope of their activities has neither geographical nor national boundaries, it is a planetary phenomenon with colossal financial power, significant monetary capital.

Everyone knows that banks receive the bulk of their profits from loans. A bank loan is, on the one hand, a sum of money provided by the bank for a certain period and on certain conditions, and on the other hand, a certain technology for satisfying the financial need declared by the borrower.

I would like to tell you about the assessment of the borrower's creditworthiness, because they decide to whom to give a loan and who not to give not just with their eyes closed, but according to a strictly defined formula, and this process should be taken seriously, because an incorrect calculation can entail irreversible consequences for the bank. I believe the topic is relevant.

Hypothesis is that to act on the same credit rating system from year to year and not update it, this can lead to the destruction of most of the banking sector financially.

Object of study is to identify problems in the credit rating system and improve, and subject consideration of the creditworthiness of the borrower.

aim course work is to study the assessment of the creditworthiness of the borrower.

To achieve this goal, the following tasks:

To study the concept of creditworthiness in general

Determine the factors on which the loan application is being considered

Examine the valuations of various types of property

Conduct an analysis on the example of different states

Etcaboutblema The specifics of the assessment of an individual lies in the difficulty of obtaining objective information.

Methods research is the study and analysis of educational and special educational literature.

Chapter 1. The concept of creditworthiness

1.1 Essence and Necessitiescredit rating bridge

In the context of the transition to market relations, economic approaches to lending are changing. An important criterion for granting loans is the creditworthiness of the borrower.

The creditworthiness of an enterprise is a narrower concept than its solvency, the ability and willingness of an enterprise to repay all types of debt. If an enterprise must repay its usual debt, as a rule, at the expense of proceeds from the sale of products (works, services), then the loan debt has three more sources of repayment:

proceeds from the sale of property accepted by the bank as collateral for a loan;

Guarantees of another bank or enterprise;

insurance indemnities.

Therefore, it is generally accepted that a commercial bank that competently gives loans can count on their full or at least partial reimbursement even in the event that the borrower becomes insolvent. Under the creditworthiness of the borrower, it is customary to understand the ability to repay the loan debt. Its assessment is an assessment by the bank of the borrower in terms of the possibility and expediency of granting him a loan. It determines the probability of its timely return and payment of interest on it. The definition of this concept does not indicate what kind of debt is meant, for what type of loan and for how long. The definition is quite universal, but in real banking practice, the creditworthiness of an enterprise is usually understood as its ability to repay a loan debt on a short-term or long-term loan.

The main objectives of determining the borrower's creditworthiness are to study the financial position of the enterprise, prevent losses of credit resources due to the inefficient activity of the borrower, stimulate the enterprise in the direction of increasing its activities and lending.

The study by banks of various factors that may lead to non-repayment of loans, or, on the contrary, ensure their timely repayment, is the content of the banking analysis of creditworthiness.

When analyzing creditworthiness, banks must decide the following questions: is the borrower able to fulfill his obligations on time, is he ready to fulfill them? The first question is answered by an analysis of the financial and economic aspects of the activities of enterprises. The second question is of a legal nature, and is also related to the personal qualities of the leaders of the enterprise.

The ability to repay a loan in a timely manner is assessed by analyzing the company's balance sheet for liquidity, the effective use of credit and working capital, the level of profitability, and readiness is determined by studying the borrower's capacity, prospects for its development, business qualities of business leaders.

Due to the fact that enterprises differ significantly in the nature of their production and financial activities, it is not possible to create unified universal and comprehensive guidelines for studying creditworthiness and calculating the corresponding indicators. In modern international practice, there are also no firm rules on this matter, since it is almost impossible to take into account all the numerous specific features of clients.

The lending process is associated with the action of numerous and diverse risk factors that can lead to non-repayment of the loan within the stipulated period. Changes in consumer demand or in production technology can have a decisive impact on the business of a firm and turn a once-prosperous borrower into a loss-making enterprise. A prolonged strike, a sharp price cut as a result of competition, or the resignation of key managers can all affect the repayment of the debt by the borrower. When granting loans, a commercial bank should study the factors that may lead to non-repayment of loans. This study is called credit analysis. The main purpose of such an analysis is to determine the ability and willingness of the borrower to return the requested loan in accordance with the terms of the loan agreement. The bank must in each case determine the degree of risk it is willing to take on and the amount of credit that can be extended in the circumstances.

When considering a loan application, bank employees take into account many factors. Over the years, bank employees responsible for issuing loans proceeded from the following points:

The capacity of the borrower, the activity of the management;

The reputation of the enterprise and its management (competence,

commitment, honesty, decency, attitude of the borrower to his

obligations in the past, etc.);

Borrower's ability to obtain funds sufficient to repay

Owning assets to secure a loan;

The role and place of the borrower in the economy of the country, region and its prospects

development;

The state of the economic environment

Creditworthiness is the legal and financial ability of the borrower to raise borrowed funds, as well as his desire and ability, under conditions of uncertainty, to return the loan received with interest within the time period established by the agreement. The essence of creditworthiness is to determine the ability of the borrower to repay the debt on the loan in a timely manner and in full, the degree of risk that the bank is willing to take on.

1.2 Information required to calculate the creditworthiness of the borrower

Today, commercial banks serve and provide loans to individuals. Due to differences in the forms of ownership and activities of banks and the borrower, the terms of a loan transaction concluded between them may be subject to significant changes.

Therefore, a borrower wishing to conclude a loan transaction must first of all provide the bank for consideration with a number of documents necessary for assessing creditworthiness and signing a loan agreement. When considering a loan application, bank employees take into account many factors that determine the risk of not repaying a loan. To obtain this kind of data, the bank, of course, will need information characterizing the financial condition of the borrower. This necessitates the study of financial statements, the possibility of unforeseen circumstances and the situation with insurance. Sources of information about the borrower's creditworthiness can be:

Negotiations with applicants;

Analysis of the financial statements of the borrower;

External sources of information;

Below are valuations of various types of property

1. Mortgage (real estate). Complete property complex. In the world practice of valuation of the property of enterprises, two main approaches are used: the valuation of funds and the valuation of a business. The first approach is to simply sum up the value of the funds used by the enterprise in its own activities. The second approach involves the assessment of the enterprise in terms of its profitability (used for profitable enterprises).

2. Buildings and structures. To evaluate buildings and structures, all three methods are used - analogues of sales, profitability and costs. At the same time, depending on the specific situation (the specifics of the object of assessment, the availability of the market and reliable information about the market, etc.), preference is given to one or another method.

3. Residential buildings, cottages, apartments and garages. The prevailing method is the method of sales analogues, this is due to the fact that the market is sufficiently developed and there is sufficient and reliable information. In this case, other methods can be used.

4. Land plots. The predominant method is the yield method. In the presence of a sufficiently developed market and reliable information, you can use the method of analogues of sales.

5. Movable property. Cars and equipment. The valuation of serial equipment is carried out using the sales analogues method. To evaluate non-serial equipment, the cost method is used, taking into account accumulated depreciation, as well as the income method, if it is possible to allocate a part of the income that the object of assessment brings. In this case, if the equipment is mounted, it is necessary to deduct the costs of dismantling, packaging and transportation.

6. Transport. To evaluate transport, as well as to evaluate equipment, the method of sales analogues and the cost method, taking into account accumulated depreciation, are used.

7. Securities. When evaluating securities (shares, bonds, internal government bonds, savings certificates of deposit, bills of exchange), the income method is used, taking into account possible risks and the method of sales analogues (based on information about securities quotes on the stock market).

To calculate the creditworthiness of an individual, it is necessary to take into account a large number of factors that determine the risk of not repaying a loan. It is necessary to correctly evaluate all the property of the borrower, including transport, securities, land plots.

Chapter 2. Analysis of existing methods for assessing cr

2.1. Foreign experience in assessing the creditworthiness of individuals

The assessment of the creditworthiness of individuals is based on the study of factors that determine their reputation, the ability to repay the loan on time and in full, the availability of loan collateral, etc. For example, in Germany, in order to obtain a consumer loan, it is necessary to submit a number of documents characterizing the personal qualities of the borrower and his the following information:

Personal qualities of an entrepreneur: character, demeanor, appearance, expressiveness of speech, degree of frankness, marital status, social role, honorary positions, hobbies;

General education: qualifications, entrepreneurial mindset, attitude to risk, gambling, interest in the economy, organization of production, ability to plan;

Special education: the course of professional development, professional experience, specialization in work;

Health status: information about past, chronic diseases, sports, exercise limits;

Property: degree of participation in the affairs of the enterprise, personal property, ownership of real estate, other sources of income, property status of family members.

In addition to this information, the bank calculates monthly income, monthly expenses and determines disposable income as the difference between income and expenses.

The bank, after checking the client's income and comparing it with the monthly debt service amount, determines the creditworthiness of the client. Income must be equal to the amount of debt and interest on it. If disposable income is less than the required amount, the application will be rejected. Creditworthiness is considered good if the amount of debt service is 60% or less of disposable income.

In the United States, the technique proposed by Duran in the early 1940s is popular. He identifies a group of factors that determine the degree of credit risk and the feasibility of issuing a loan. The methodology is based on a credit score. A potential borrower is invited to fill out special standard questionnaires. Points are awarded depending on age, gender, marital status, monthly income, settlement, employment in a particular industry and period of work in a particular place, the presence of a savings account in a bank, real estate, insurance policy, etc. To make a positive decision, it is necessary that the total points exceed a certain level.

A simplified borrower scoring model is as follows.

1. Age of the Borrower: 0.01 points for each year over 20 years, with a maximum of 0.3 points.

2. Gender: 0.4 points - female; 0 - male.

3. Settlement: 0.042 points for each year lived in the area, with a maximum of 0.42 points.

4. Employment: 0.55 points for a profession with a low level of risk to life; 0 - high risk; 0.16 - for other professions.

5. Industry: 0.21 for public utilities, government and bank employees, 0 for everyone else.

6. Employment stability: 0.059 points for each year at the given place of work, with a maximum of 0.59 points.

7. Having a savings account in a bank: 0.35 points.
8. Presence of real estate: 0.35 points
9. Life insurance: 0.19 points.

The critical sum in this model is 1.25, i.e. if the final score of the client is below the specified level, he will not be granted a loan.

In France, the creditworthiness of an individual is assessed using a scoring system. The program for determining the feasibility and conditions for issuing a consumer loan contains three sections: information on the loan and on the client, the financial situation of the client.

The first section contains data on the bank employee issuing the loan, the client's dossier number, the name of the agency, the type and amount of the loan, the frequency of its repayment, the interest rate, the date of the loan, the day of the month chosen by the client for its repayment, the answer to the question about the need for insurance , the absolute amount of the monthly loan repayment with and without an insurance premium, the total amount of interest and insurance payments to be paid to the bank.

In the second section of the program, data are entered on the client's profession, his belonging to a certain social group, employer, net annual earnings, expenses for the year, work experience.

Based on the input of the listed information, bank employees receive an opinion whether it is possible to issue a loan. If the answer is negative, the bank agency may refer the client to its directorate for additional consideration of the issue of the possibility of granting a loan.

Creditworthiness assessment is used everywhere, but each state has its own priorities and concepts of reliability. If in Germany they consider the personal qualities of the borrower, then in the USA they are judged by settled position and profession with a low level of risk. Creditworthiness of the borrower banks

2.2 Russian practice of assessing the creditworthiness of individuals.

Consider the Russian practice of assessing the creditworthiness of an individual.

When deciding on the issuance of loans, the financial situation of the borrower, his ability to fully and within the prescribed period to repay the loan received are taken into account. Loans are not issued to citizens whose deductions under executive documents amount to 50% of earnings.

The Bank accepts collateral, surety (guarantee) and obligations in other forms accepted by banking practice as security for the timely repayment of loans.

To determine the creditworthiness of the client, it is recommended to study both the monthly income and expenses of the borrower. Income is generally defined in three ways:

1) income from wages;

2) income from savings and securities;

3) other income.

The main expenses of the borrower include payments of income and other taxes, alimony, monthly payments on previously received loans and goods purchased in installments, life and property insurance payments, utility bills, etc.

One of the main indicators that determine the possibility of issuing a loan is the financial and social stability of the borrower. Under all equal conditions, preference is given to a client who has stable expenses more sufficient to repay the loan, as well as a long work experience in an enterprise, organization and longer residence at a given address.

To obtain a loan, the borrower submits the following documents confirming his creditworthiness:

A certificate from the place of work, which indicates his salary at the place of main work, indicating the size and types of deductions, as well as the length of service at the enterprise.

Book on calculations for utilities, rent;

Documents confirming income on deposits in banks;

Other documents confirming the client's income.

Based on the above documents, an analysis of the client's creditworthiness is carried out. The average monthly income of the borrower is determined taking into account his salary, interest on deposits in banks, securities and other income. The average monthly expenses of the borrower are determined taking into account the amount of income and other taxes paid, deductions from wages (alimony, repayment of previously issued loans, etc.), payments for rent and utilities and other expenses.

The purpose of the analysis of the client's creditworthiness is to jointly with him determine the most rational conditions for granting a loan in terms of its size, terms, organization of loan repayment.

Methods for assessing the creditworthiness of individuals

Chapter 3Problems and improvements in creditworthiness assessment

3.1 Problems of cr assessmentsolvency of individuals

As world practice shows, a significant part of the income of banks is formed as a result of credit operations - from 40% to 65%. However, it is these operations that are associated with significant risk - they also account for 50% to 85% of bank losses. Credit risk can be defined as the probability of incurring losses due to non-performance, untimely or incomplete performance by the debtor of financial obligations in accordance with the terms of the contract.

This fact suggests the need for a detailed assessment of the creditworthiness of borrowers. The creditworthiness of bank customers is often understood as such a financial and economic condition of the borrower, which gives confidence in the effective use of borrowed funds, the ability and willingness of the borrower to repay the loan in accordance with the terms of the contract.

The assessment of the borrower's creditworthiness involves an analysis by the bank of the borrower in terms of the possibility and expediency of granting loans to him, determining the likelihood of their timely repayment in accordance with the loan agreement. It is carried out on the basis of identifying objective results and trends in the financial condition of the borrower.

The purpose of assessing the creditworthiness of individual borrowers is to determine the risk associated with lending to private borrowers. The bank must in each case determine the degree of risk it is willing to take on and the amount of credit that can be extended in the circumstances. Most consumer loans are relatively small in size, while consumer loan transaction costs are relatively high. This suggests that banks must maintain economies of scale in order to achieve profitability, i.e. should increase the number of loans provided to reduce their own costs.

Existing approaches to assessing creditworthiness can be grouped into two areas - qualitative and quantitative.

The qualitative approach is based on the method of expert assessments, which involves the analysis of data on the material, property and financial position of the borrower, and the preparation of a forecast of its future activities.

Determining the creditworthiness of an individual is associated with a number of problems. In particular, the lack of a system for the effective functioning of credit bureaus makes it difficult to assess. This entails the absence of credit histories, which makes it possible for unscrupulous borrowers to receive several loans at the same time in different banks without any verification of their previous credit records.

The use of a quantitative approach is accompanied by informational problems. Most of the creditworthiness indicators used in practice are historically oriented, as they are calculated on the basis of data for the past period. Moreover, data on balances at a certain date (stock) are usually used, rather than more accurate and informative data on turnovers for a period (flow). For example, a 2-NDFL certificate or in the form of a bank, which is required to be provided, contains information on which the client's average monthly net income for the past period is calculated. It is very difficult to assess the prospects for changes in numerous factors and circumstances that will determine the borrower's creditworthiness in the future. The bank is interested in assessing the ability to repay the loan in terms of the future period; it is important for it to obtain a reasonable forecast of the borrower's behavior. Thus, this suggests that many credit ratios have limited retrospective significance.

As part of a qualitative approach to assessing creditworthiness, factors that are not subject to quantitative assessment are used. This applies primarily to moral values, reputation, credit history of the borrower. Conclusions on these criteria are subjective, relative. Often, this is an even more difficult assessment than assessing the financial viability of the borrower.

The problem of the specifics of the assessment of an individual lies in the difficulty of obtaining objective information about their creditworthiness. It is easier for individuals to hide material information regarding the repayment of a consumer loan, for example, about their own health, their employment prospects, the amount of wages they receive, the fulfillment of their debt obligations, than most business enterprises, the assessment of which is based on an analysis of financial statements certified by auditors. But even without taking into account the probability of hiding information, the objectivity of information is lower, since the parameters that are not always estimated, for example, the amount of income, depend on the individual himself.

Thus, in our opinion, it is very difficult to form an integral assessment of the borrower's creditworthiness by using and summarizing digital and non-digital data. In this case, in addition to digital analysis, an expert assessment of qualified analysts is required.

Various methods of assessing creditworthiness differ from each other in the composition of factors used in assessing the overall credit rating of the borrower, as well as approaches to assessing each parameter of the model and the degree of significance of each of them. Unfortunately, the composition of factors in the model is not universal for all banks and countries, which, in turn, does not allow the global banking community to exchange statistics and improve their scoring systems.

3.2. Improving the assessment of the creditworthiness of individuals

It should be noted that the understanding of the feasibility and relevance of using more advanced methods occurs most often in those banks in which lending to individuals is implemented as a mass service.

If the bank plans to launch a large-scale program, then in order to succeed in the market in the face of constant toughening of competition and, as a result, a decrease in profitability, it is necessary to look for ways to reduce operating costs and minimize risks.

A prerequisite here will be the correct construction of the mechanism that will carry out this activity. Figuratively speaking, it is necessary to create a kind of pipeline consisting of a certain number of employees interacting with borrowers and among themselves according to certain clearly defined rules and algorithms. Such algorithms include methods for analyzing applications and making decisions on issuing a loan.

The technology used by the bank for assessing individual borrowers is proposed to be modernized as follows:

Modernized scheme for assessing the borrower - an individual

The system should consist of two analytical blocks: a data analysis block and a decision making block. The analysis block of the system analyzes data on the bank's borrowers, on loans issued and the history of their repayment. The analysis block must be supplemented with the following queries:

1) income received (using the database of the Pension Fund of the Russian Federation);

2) available real estate, land plots, their area and location (using the database of the Bureau of Technical Inventory and the Department of Justice);

3) availability of vehicles, their age (traffic police database);

4) confirmation of registration data (despite the presentation of a passport, since registration data may be false - the PVS database);

5) attracting data from specialized credit bureaus (the need for which is obvious in banking retail) on the availability of urgent and repaid loans in other banks.

Such requests should be carried out on a contractual basis, in real time, as soon as possible.

Of course, at the beginning of the functioning of the modernized data verification system, the bank's costs for such an operation will increase. But as the system of information exchange is established and credit risk is reduced, the bank will receive tangible returns.

In the process of analyzing data on borrowers and loans, various mathematical methods are used to identify factors and their combinations in them that affect the creditworthiness of borrowers, and the strength of their influence. The discovered dependencies form the basis for making decisions in the corresponding block.

The decision block is used directly to obtain the conclusion of the automated banking retail system on the creditworthiness of the borrower, on the possibility of issuing a loan to him, on the maximum allowable loan amount. A bank employee works with this block, who either enters a new borrower's questionnaire into it, or receives it from a point of sale where the bank implements a consumer lending program.

The proposed approaches to improving the organization of the process of lending to individual borrowers at the stage of assessing their creditworthiness will make it possible to unify the procedure, on this basis to speed up and reduce the cost of it, to obtain a more accurate and reasonable result, which will ultimately reduce lending risks, ensure the necessary stability of the bank and a given level of profitability.

There is a huge scope for improvement and optimization in the borrower's credit rating system. Currently, there are many shortcomings in the system, but they are fixable. It is necessary to more carefully check the data about the client, his documents in order to avoid the risk of fraud. Most Russian commercial banks either do not take into account the cause of the borrower's bad credit history (possibly due to reasons beyond his control), or, relying on the client's bad credit history, make a decision not in favor of the potential borrower. This problem is often invisible to bank employees, but has a tangible impact on customers, so it is necessary to analyze in more depth.

Conclusions and conclusions.

The purpose of the course work was to assess the creditworthiness of the borrower and develop a methodology for lending to individuals.

The work showed that credit relations are among the most important categories of economic science. The development of credit relations in the economy is the most common. It includes types of loans by industry, duration, purpose, security, the nature of the circulation of funds, the method of presentation and the type of borrowers for which banks have their own methods for assessing their creditworthiness.

The creditworthiness of a commercial bank client is the ability of the borrower to fully and on time pay off his debt obligations (principal and interest). Unlike its solvency, it does not fix non-payments for the past period or for some date, but predicts the ability to repay the debt in the short term. The level of creditworthiness of the client determines the degree of risk of the bank associated with the issuance of a loan to a particular borrower.

To improve the methodology for assessing the borrower's creditworthiness in order to reduce credit risks, it is necessary to analyze both negative and positive information received from the credit bureau about a potential borrower in order to ensure its objectivity.

Bibliographic list

1. Civil Code of the Russian Federation (as amended on July 23, 2008), SPS Garant.

2. Labor Code of the Russian Federation of December 30, 2001 No. 197-FZ (as amended on July 23, 2008), SPS Garant.

4. Federal Law of December 2, 1990 No. 395-I “On Banks and Banking Activity” (as amended on April 8, 2008), SPS Garant.

5. Law of the Russian Federation of February 7, 1992 No. 2300-I “On the Protection of Consumer Rights” (as amended on July 23, 2008), SPS Garant.

7. Federal Law of October 26, 2010 No. 127-FZ “On Insolvency (Bankruptcy)” (as amended on July 23, 2008), SPS Garant.

8. Federal Law of December 23, 2010 No. 177-FZ “On insurance of deposits of individuals in banks of the Russian Federation” (as amended on October 13, 2008), SPS Garant.

9. Federal Law of December 30, 2004 No. 218-FZ “On Credit Histories” (as amended on July 24, 2007), SPS Garant.

10. Letter of the Government of the Russian Federation and the Central Bank of December 30, 2011 "On the Strategy for the Development of the Banking Sector of the Russian Federation", SPS Garant.

11. Regulation of the Central Bank of March 26, 2009 No. 254-P “On the procedure for the formation by credit institutions of reserves for possible losses on loans, on loan and equivalent debt” (as amended on June 16, 2008), SPS Garant.

12. Instruction of the Central Bank of May 13, 2008 No. 2008-U “On the procedure for calculating and communicating to the borrower - an individual of the full cost of the loan”, SPS Garant.

13. Antonov N.G., Pessel M.A. Money circulation, credit and banks. - M. Finstatinform, 2003. - 269s.

14. Banking / Ed. O.I. Lavrushin. - M., Bank. and exchange scientific and consulting. center, 2006. - 428s.

15. Banking / Ed. D.G. Blueberry. - M.: Finance and statistics, 2010.- 554p.

16. Glazkova O.A. Ways and problems of lending development // Bank lending. 2008. No. 4.

17. Golubev S.G., Galochkin V.V. commercial banks. - Minsk: Algorithm, 2006. - 262 p.

18. Gotovchikov I.F. A practical method for express-assessment of the financial capabilities of individuals and legal entities //Bank lending. 2005. No. 3.

19.Money. Credit. Banks. / Ed. Istomina I.V. - M.: Banks and stock exchanges, UNITI, 2005. - 623p.

20. Dadalko V.A., Dadalko A.V. Finance and Credit: A Course of Lectures. - Minsk: Armita-Mirketing, Management, 2011. - 287p.

21.banknt.ru/id=105

22. afdanalyse.ru/publ/finansovyj_analiz/ocenka_kreditosposobnosti/metodika/

Appendix

How the creditworthiness of an individual is determined according to the point system. At the first stage, information about a potential borrower is collected. To do this, the borrower fills out a test - questionnaire

Assessment of general customer information

	Borrower characteristics	Answer options





	Family status	Married)
		Single, not married)
		Divorced
		Widower (wa)
	marriage contract

	Dependents of which children




	resides	In your own home

		Relatives
	Place of residence (registration)	Moscow and Moscow region
		Other region

The maximum score for the first stage of assessing the borrower's creditworthiness is 8 points.

At the second stage, the bank studies information about the employment of a potential borrower

Assessing the customer's employment information

	Borrower's employment information	Answer options
	Education
		Specialized secondary

	Cooperation	VTB24 employee
		VTB24 corporate client employee
	Place of employment	Own business
		Employment
		Work in the public sector
	Position	Top manager
		Supervisor
		employee
	Average monthly expenses in relation to family income

The maximum number of points at the second stage of assessing the borrower's creditworthiness is 16 points.

At the third stage of assessing the client's creditworthiness, a potential borrower is required to provide relevant agreements with banks. The maximum number of points at this stage of the test is 5 points.

At the fourth stage of assessing the creditworthiness of a borrower - an individual, its assets and liabilities are evaluated (Table 2.6).

Valuation of the client's assets and liabilities

	Borrower characteristics	Answer options
	Average monthly salary for the last 6 months, trend towards its change



	Wage dynamics
		stable
		Decreases
	Other sources of income, the presence of other profitable investments (the presence of securities, deposits)	Additional salary
		Rental income

		Securities
		Other income
	The presence of obligations that reduce income (payments on a loan, other debts, including alimony)	Alimony
		Loan commitments
		Deductions by court order
		Insurance payments
		Tuition fee

The procedure for assessing the financial capabilities of a potential borrower

Characteristic	Conventions
1. Living wage in the lending region
2. Persons in custody, number

3. Average salary for the last 3 months.
4. The annual amount of other regular income taken into account as sources of loan repayment
5. Final average monthly income	Sd \u003d 3 + Pd / 12

6. Maintenance costs	Rs \u003d (L + 1) * Pm
7. Monthly payment for an apartment (when receiving, renting)
8. Annual tuition fee
9. Annual amount of contributions for voluntary insurance
10. Payments in repayment of current debt on loans, credits, interest on them (average for the last 3 months)
11. Other expenses (alimony, court deductions, etc.), average for the last 3 months.
12. Final average monthly expense	Wed \u003d Rs + Pk + Pl + Pr + (Pu + Sun) / 12
13. Average monthly disposable income	Rd \u003d (Sd - Wed)
Characteristic	Meaning	Evaluation by criterion
Share of the monthly payment	Dp \u003d Mp / Rd

The fifth stage of assessing the creditworthiness of a borrower - an individual - is the assessment of his property. The presence of property, the owner of which the potential borrower is, allows you to assign him the following points:

Privatized apartment - 3 points;

Own house, cottage - 2 points;

Garden (country) plot - 1 point;

Car - 2 points;

Boat (yacht) - 3 points;

Other - (-1) points.

If the listed properties are insured, the client is additionally assigned three points, if they are not insured - zero points.

At this stage, the potential borrower must provide a document confirming the ownership of housing or a housing lease (hiring) agreement, insurance policies. The maximum number of points scored at this stage is 14 points.

At the sixth stage, the bank examines information about the property acquired at the expense of the requested loan.

If the object of lending is the purchase of an apartment, the potential borrower is assigned the following points:

1. Estimated cost of the purchased apartment:

Up to $25,000 - 4 points;

Up to $50,000 - 3 points;

Up to $75,000 - 2 points;

Up to $100.000 - 1 point

Over $100.000 - 0 points.

2. Loan term:

1 year - 5 points;

2 years - 4 points;

3 years - 3 points;

4 years - 2 points;

5 years - 1 point.

3. Initial capital (% of the cost of the apartment):

30% - 1 point;

40% - 3 points;

50% - 5 points;

- >50% - 6 points.

If the object of lending is the purchase of a car, the potential borrower is assigned the following points:

1. Selling price of a car in a car dealership:

Up to $10,000 - 3 points;

- $10.000 - 20.000 - 2 points;

Over $20,000 - 1 point.

2. Vehicle storage conditions:

Garage cooperative - 3 points;

Guarded parking - 2 points;

Garage in the yard - 2 points;

Tent shelter - 1 point;

No conditions - 0 points.

3. Availability of a driver's license:

No - 0 points.

4. Driving experience:

Up to 1 year - 1 point;

1-3 years - 2 points;

More than 3 years - 3 points.

At the seventh stage of assessing the creditworthiness of an individual, information about the guarantor is studied (if the client wants to receive a loan under the guarantee of a legal entity). If the guarantor is a client of CJSC "VTB 24", the client is assigned 5 points, if another bank - 0 points. If the guarantor is the employer of the potential borrower, the client is assigned 5 points, if not the employer - 0 points

At the eighth stage of assessing the creditworthiness of the client, additional information about the potential borrower is considered.

1. Has the client been held criminally liable?

Yes - (-10) points;

No - 0 points.

2. Presence of unexecuted court decisions:

Yes - (-10) points;

No - 0 points.

3. Is the client under trial or investigation:

Yes - (-5) points;

No - 0 points.

4. Have any civil suits been filed against the client:

Yes - (-5) points;

No - 0 points.

5. Does the client take actions to obtain loans from other banks (credit institutions):

Yes - (-3) points;

No - 0 points.

According to the results of the assessment of the client's creditworthiness, depending on the points scored, the loan falls into one of the quality categories.

Hosted on Allbest.ru

...

The paper discusses the concept, essence and necessity of assessing creditworthiness. An analysis is made of existing methods for assessing the creditworthiness of individuals, problems and improving the assessment of creditworthiness. Calculation of the possibilities of the borrower.

Send your good work in the knowledge base is simple. Use the form below

Similar Documents

Loans

Credit history

Mortgage

For business

Miscellaneous about finance

Contributions, deposits

Finance and more

Getting cards