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Examining the relationship between credit risk management and Bank Mellat's outstanding claims

Number of pages: 217 File Format: word File Code: 30315
Year: 2014 University Degree: Master's degree Category: Management
Tags/Keywords: Credit risk management - Management of Bank Mellat branches - Mellat Bank - Outstanding claims
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  • Summary of Examining the relationship between credit risk management and Bank Mellat's outstanding claims

    Dissertation for Master's Degree in Industrial Management, Financial Orientation

    Subject: Investigating the relationship between credit risk management and overdue claims of Bank Mellat

    Abstract

    The purpose of this study is to investigate the relationship between credit risk management and overdue claims of Bank Mellat in the form of a case study in the management of Bank Mellat branches in Semnan province. The statistical population of the current research is Bank Mellat of Semnan province. The statistical sample of the present research is in the management of Bank Mellat branches in Semnan province in the period of 2011-2013. In terms of method, the present research is a descriptive research and a type of correlational study. In addition to this method of data analysis, correlation analysis or variance analysis has been used to explain the cause and effect relationship between credit risk management (as an independent variable of the research, which includes: 1- credit risk of loans received by customers individually (which corresponds to the individual analysis of securities risk), and 2- credit risk of the loan portfolio (which is equivalent to the analysis of the risk of the securities portfolio)), with overdue claims (as a dependent variable of the research) of Bank Mellat in branch management Bank Mellat has been in Semnan province, and the results of this research show that: the relationship between credit risk management and outstanding claims of Bank Mellat and as a case study in the management of Bank Mellat branches in Semnan province has been meaningful. At the 5% (percentage) error level, and also at the 95% (percentage) confidence level, it shows a significant relationship between the two variables of credit risk management with Bank Mellat's outstanding claims and as a case study in the management of Bank Mellat branches in Semnan province. Therefore, according to the outputs of the statistical software (SPSS) shown in the above tables, it can be stated that since the significance level (sig) is less than five percent, the hypothesis H0 is rejected at the error level of five percent and the existence of correlation between these two variables is confirmed. And these results can be generalized to the entire statistical population of the research, that is Bank Mellat.

    Key words: credit risk management, outstanding claims, management of Bank Mellat branches in Semnan province.  

    Introduction

    The creation and expansion of international dependencies in many political and social aspects, especially in the conditions of economic globalization, has caused the necessary incentives for the integration of banking and financial systems to enjoy a special place. As a result, the importance of accounting and banking management issues in the global concept and its understanding has become very necessary. In this regard, the continuous control and review of key balance sheet items and assessment of important issues in the balance sheet, including liquidity, ability to pay debts, and financial flexibility, as well as the density, diversity, timing, and quality of assets and liabilities, are very necessary. In the traditional way, the impact of this risk is measured by the Riyal cost caused by the contract party's default[2]. Losses caused by credit risk may occur before the actual occurrence of default on the part of the contract party. Therefore, credit risk can be defined as a possible loss that occurs as a result of a credit event. A credit event occurs when a party's ability to meet its obligations changes. With this definition, a change in the market value of debt due to a change in credit rating (or a change in the market's awareness of the ability of the contracting party to fulfill its obligations) can also be considered as credit risk (Radpour, 2013).

    Until 1970, most banking activities included credit payments. In other words, it was intermediation between small and low-cost deposits and lending.

    Pricing and investments were based on simple decisions, and the key management challenge was to control the quality of assets, loan losses and overhead costs. Acceptable profit margin is very necessary) (Jeroning and Bratanovich, 2003).

    Banking supervision committee in the Bank of International Settlements, known as the Ball Committee, believes that liquidity in banks is very important and the lack of liquidity has wide consequences. For this purpose, it has conducted extensive research and studies in the field of achieving a series of basic procedures and principles for liquidity management..

    After the publication of a report in September 1992 entitled "A Framework for Measuring and Managing Liquidity", by making the necessary amendments and changes and taking into account the general and basic principles in bank liquidity management, in February 2000, a publication entitled "Effective Methods in Bank Liquidity Management" was published by the aforementioned committee. The basis of this publication consists of 14 key principles in the way of bank liquidity management, which are described in 94 paragraphs. The activities of banks and financial institutions in the fields of granting facilities, investing, issuing various types of bonds, issuing various types of certificates of deposit, issuing guarantees and opening various types of letters of credit, or in other words, acting in the money and capital markets, have exposed them to the risks and risks specific to such activities.

    Banks face various types of risks, the risk that this research deals with is called operational risk. Currently, the world's reputable banks are taking significant measures in the field of dealing with operational risks. These measures include the following steps: 1-Identifying operational risks in the financial institution (here we mean operational losses). 2-Evaluating or, more precisely, quantifying operational risks (the result of which is determining the amount of capital required to deal with operational risks.) 3-Managing operational risks, which includes risk transfer (using insurance tools, etc.) or taking measures to reduce the amount of operational risks of the organization. be).

    1-2- Statement of the problem

    The fact is that many problems have been created in the degree of impact of risk on the performance of banks. It means that we observe that the act of separating bank loans into two real and legal sectors and measuring them in the performance of banks is completely different, but it shows that the banking industry and its stakeholders should pay more attention to this important category, which is not the case in practice. Among the most important existing factors, we can point out the lack of optimal opportunities, the absence of average forces and the lack of use of scientific risk management tools, which banks should pay special attention to that the present research was formed based on the existing problems. And for this purpose, we have carried out credit risk management, which is one of the most important topics in modern banking, at two levels as follows:

    1- Reviewing the credit risk of loans and customers individually (which corresponds to the individual analysis of the risk of securities).

    2- Reviewing the credit risk of the loan portfolio in a non-individual way (which is equivalent to the risk analysis of the portfolio of securities).

    Evaluating and measuring the ability of customers to repay Individual credit and calculating the probability of non-repayment of received credits is called "validation". Validation is a system by which banks and credit institutions, using the applicant's current and past information, evaluate the possibility of him not repaying the loan and give him his special score. This method is an objective tool for credit risk management of banks and classifies credit customers impartially based on qualitative and quantitative statistics and information. Validation models can be divided into two main groups:

    1) parametric validation models such as:

    linear probability model[3]

    probit and logit models[4]

    models based on audit analysis[5]

    2) non-parametric validation models such as:

    mathematical programming

    Classification trees (recursive segmentation algorithms)[6]

    Nearest neighbor models[7]

    Analytic hierarchy process[8]

    Expert systems[9]

    Artificial neural networks[10]

    Evaluation and measurement of bank loan portfolio credit risk considering diversification effects And the relationship between the various positions in the loan portfolio and the credit portfolio management is called "credit portfolio management [11]". Such systems help bank managers to make the best possible credit decisions, decisions that are based on qualitative and quantitative evaluations of individual loans and the bank's credit portfolio.

  • Contents & References of Examining the relationship between credit risk management and Bank Mellat's outstanding claims

    List:

    Table of Contents

    Title

    Page Number

    Topic: "Investigation of the relationship between credit risk management and overdue claims of Bank Mellat)".

    1-1-Introduction..3

    1-2-Statement of the problem..4

    1-3-Importance and necessity of research..10

    1-4-Research objectives. 11. 1-4-1- The main purpose of the research. 11

    1-4-2- The sub-objectives of the research..11

    1-5-Research questions and hypotheses. 11

    1-5-1- 2-Research sub-questions. 13

    1-6-1-Spatial domain of research..13

    1-6-2-Temporal domain of research..13

    1-6-3-Thematic domain of research.13

    1-7-Definition of terms and words.

    2-2- Literature and research background..20

    2-2-1- Research literature..20

    2-2-1-1- Bank and banking..20

    2-2-1-2- Necessity of banking. 23.2-2-1-5- Risk theory..26

    2-2-1-6- Importance of risk..26

    2-2-1-7- Risk calculation methods..27

    2-2-1-8- Risk management..28

    2-2-1-9- Principles and regulations of the wing committee regarding risk management. 29.2-2-1-10- Definition of risk..30

    2-2-1-11- Classification of risks. 30

    2-2-1-12- The concept of facility risk. 32

    2-2-1-13- The most important banking risks. Financial institution. 36

    2-1-15-2-2-1- Credit risk calculation models and CR model analysis. 36

    2-2-1-16- Criteria and models used for rating customers. 39

    2-2-1-17- Current approach in the country regarding the interest rate of deposits and granted facilities. 41

    2-2-1-18- Determination of interest rate Facilities and deposits in recent years. 44

    2-2-1-19- Examination of exchange and partnership contracts in the policy and regulatory packages of the Central Bank. 48

    2-2-1-20- Banks based on different sectors regarding partnership contracts. 50

    2-2-1-21- The approach of other countries regarding interest rates. 50

    2-2-1-22- An overview of the performance of insurance companies with the purpose of risk coverage. 51

    2-2-1-23- How to determine the interest rate in mortgage loans. 53

    2-2-1-24- Definition of operational risk. 55

    2-2-1-25- The importance of operational risks. 56

    2-2-1-26- Features of the definition Operational risk from the point of view of the wing committee. 56

    2-2-1-27- Operational risk measurement methods. 57

    2-2-1-28- Establishing a structure for liquidity management. 60

    2-2-1-29- Monitoring and measuring net funds required. 60

    2-2-1-30- Internal controls for liquidity risk management. 61

    2-2-1-31- Characteristics of liquid assets in banks. 62

    2-2-1-32- Characteristics of liabilities in banks. 63

    2-2-1-33- Liquidity management models. 69

    2-2-1-34- Financial credit risk management strategies. 72

    2-2-1-35- Introduction of Bank Mellat and the management of Bank Mellat branches in Semnan province.73

    1- History of Bank Mellat.

    2-2-2- Background of research..80

    2-2-2-1- Background of internal research..80

    2-2-2-2- Background of external research. Research..93

    A) Classification of research according to the purpose.93

    1-Fundamental research..93

    2-Applied research..94

    3-Research and development..94

    B) Classification of research according to the method of data collection (research plan).94

    Descriptive research (non-experimental)..94

    Experimental research..94

    Applied research.. 94

    3-2-1-Statistical community..95

    3-2-2-Sample size..97

    Sampling method..97

    3-2-2-1- Data collection tool.100

    3-3- Assumptions102

    3-3-1- The main hypothesis of the research. 102

    3-3-2- Sub-hypotheses of the research. 102

    The first hypothesis of the research. 102

    The second hypothesis of the research. 102

    The third hypothesis of the research. 102

    The fourth hypothesis of the research.102

    2-2- The fifth hypothesis Research. 102

    2-3- The sixth hypothesis of research. 102

    3-4-Research domain. 102

    3-4-1- Spatial domain of research. 102

    3-4-2- Time domain of research. 103

    3-4-3- Thematic domain of research. 103

    3-5- Data analysis method 103

    A) Descriptive statistics. 104

    B) Inferential statistics. 104

    Chapter Four: Data Analysis

    4-1-Introduction. 106

    4-2-Statistical description of data. 106

    4-3-Statistical population and sample size and sampling method. 108

    4-3-1-Statistical population. 108

    3-3-2-Volume Example. 108

    4-4- The results of preliminary data tests. 109

    4-4-1- Statistical description of data and data characteristics. 109

    4-4-2- Test to determine the normality of variables. 109

    4-5- How to measure the research variables. 111

    4-6- Data analysis and testing of research hypotheses. 111

    4-6-1- Test results of the first research hypothesis. 111

    First research hypothesis. 111

    4-6-2-Results of the test of the second hypothesis of the research.115

    The second hypothesis of the research.115

    4-6-3-The results of the test of the third hypothesis of the research.119

    The third hypothesis of the research.119

    4-6-4-The results of the test of the fourth hypothesis of the research.123

    The fourth hypothesis of the research.123

    4-6-5-The results of the test of the fifth hypothesis of the research.127

    The fifth hypothesis of the research.127

    4-6-6-The results of the test of the sixth hypothesis of the research.131

    The sixth hypothesis of the research.131

    4-6-7-The results of the test of the first main hypothesis of the research.135

    The first main hypothesis Research. 135

    4-6-8- The results of the second main hypothesis test of the research. 139

    The second main hypothesis of the research. 139

    Chapter five: discussion and conclusion

    Introduction. 145

    5-2-1- Summary of the results of the research hypothesis test separately (discussion on the research findings). 145

    5-2-2- Summary of the results of the first research hypothesis test. 145

    5-2-3- Summary of the second research hypothesis test results. 146

    5-2-4- Summary of the third research hypothesis test results. 147

    5-2-5- Summary of the fourth research hypothesis test results. 148

    5-2-6- Summary of the fifth research hypothesis test results. 149

    5-2-7-Summary of the results of the test of the sixth research hypothesis. 150

    5-2-8-Summary of the results of the test of the first main hypothesis of the research. 151

    5-2-9-Summary of the results of the test of the second main hypothesis of the research. 152

    Conclusion. 154

    Limitations of the research. 155

    5-4- Research suggestions. 156

    5-4-1- Practical research proposals. 156

    5-4-2- Research proposals for future studies. 158

    List of research sources and sources. 159

    A) Persian sources. 159

    B) Latin sources. 164

    List of appendices and research appendices. 170

    List of tables

    Title Page number

    Table 1- Ratings used by major rating agencies. 24

    Table 2-1: Symbols, definitions of credit ratings. 25

    Table No. 2-2: Interest rate on account of investment deposits 1387-1390. 42

    Table No. 2-3: Facility interest rates by types of contracts 1387-1390. 44

    Table No. 2-4: Interest rate on long-term investment deposits. 46

    Table No. 5-2: Interest rate of bank facilities in exchange and partnership contracts (after the implementation of the banking law without usury). 47

    Table 6-2: Standard index method. 59

    Table 7-2: Statement of the status of items of claims for facilities paid to individuals (individuals) of Bank Mellat in Semnan province from 1381 to 1391 *Figures are in millions of Rials. 71

    Table 8-2: Statement of the items of claims for facilities paid to companies (loan basket) Bank Mellat of Semnan province from 1381 to 1391 *Figures are in millions of Rials. 71

    Table 2-9: Report of facilities paid to individuals (individuals) of Bank Mellat of Semnan province from 1981 to 1991. 72

    Table 2-10: Report of facilities paid to legal entities (loan portfolio) of Bank Mellat of Semnan province from 1981 to 1991. 72

    Table (3-1): Statistical sample of research (Bank Mellat of Semnan province from 1381 to 1391). 99

    Table 3-1: Identification of the nature of outstanding claims. 101

    Table 3-2: Bank interest rate.

Examining the relationship between credit risk management and Bank Mellat's outstanding claims
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