Published
Development Economic Review
Credit Risk Measurement System
Abstract
This paper critically reviews the evolution of credit risk measurement on individual loan and loan portfolios of banks and financial institutions. The first generation based on stand-alone unit of expert system is ease of use but tends to be bias and pessimistic on the borrowers. The second development is based on key accounting ratios derived from financial statements of potential borrowers but fail to incorporate market values. Further, the theoretical based model provides reliable measures of credit risk. Recent development measures credit concentration risk at portfolio level which allows financial institutions to assess their risk-taking capacity more effectively.
(2555). Credit Risk Measurement System. Development Economic Review, 6(2), 53-86.