Belova Diana, Samoylov
Alexey
Southern Federal
University, Russia
Approaches
of an assessment of solvency of the borrower in bank
There is a gradual improvement in the economy at this time and bank's
activity begins to increase. This situation makes more favourable opportunity
of development of the market of consumer lending, and lending to individuals in
General. Many banks had already began to take into account the official incomes
of the family’s members (in some
cases and informal income) during
the last year and turnover on card account, provided commodity loans in the
networks of home appliances without income certificate.
How does the Bank consider the potential borrower?
The Bank carries out the analysis of the
received application when it is submitting the request for obtaining a loan. This process consists of the following stages:
• writing the proposal verification
(checking) documents, coordination of conditions of the transaction;
• preliminary assessment of the
borrower's sales Manager (including the evaluation of the data obtained by
direct contact);
• verifying the credit history of the client;
• checking of the data specified by
the client in the application form, residence, place of work, income, etc.;
• analysis of the client's ability to
repay the mortgage loan;
• structuring the transaction as a possible
request for additional comfort factors (surety relatives, increase of the
advance fee, the provision of additional collateral etc);
• formation decisions on the request
of the client, the signing of this decision at the official in accordance with
the powers.
The Bank will assesses the future creditworthiness
of the potential borrower when it is considering requests for loans. This is
one of the ways to prevent or at least minimize the credit risk of the Bank.
Solvency or, in other words, creditworthiness
implies the willingness and ability of the borrower in due time and in
full, to pay off credit obligations.
Analysis of the credit history implies checking the data about the quality
of the payment discipline of the potential borrower has previously received
loans in the Bank (in case of the current client) or in other banks. To check
the credit history analysts use internal and external «black lists, white
lists, the existing database of credit histories.
Assessment of the solvency at the level of incomes of the potential
borrower is carried out on the basis of the data on incomes of physical persons
and the degree of risk of their loss. The main income of natural persons is
directly their salary (pension), confirmed the provided certificate from the
borrower's place of employment. Also take into account other sources of income
(income from renting out property, income from business activities, income from
deposits, dividends etc) that can be confirmed by the tax Declaration of the
client.The credit analysts assess the adequacy of the data provided are based
on the minimum wage, average wage levels in the region or industry. Some banks
include when calculating the income of other family members, civil partners
(often, when providing their sureties). Not confirmed income partially or fully
taken into account in accordance with the special matrix, developed and
approved by the Bank.
Indirectly, about the size of incomes of the client (in case of official
income is not enough) could indicate its costs: buying a car, real estate,
expensive equipment, equipment (can be confirmed contracts of purchase),
vacations abroad, repairs, have deposits, prematurely repaid loans (can be
supported by references from banks).
After that, these revenues are adjusted on mandatory payments (housing,
food, transport, clothing, payments on existing loans, insurance etc). The
obtained result is compared with the future delivery on the requested limit.
Basically, for a positive decision on granting the loan, the net monthly income
of the customer (adjusted for fixed charges) must exceed the payment for the
requested loan more than 2 times.
In addition, it is also possible to use the indicator of income
multiplier, which involves the calculation of the possible loan amount as n-TES
increase of the monthly income. In this case, the normal value is considered
the debt load up to 50%, and sum of credit should not exceed 4-6 times the net
cash income.
When calculating the possible sum of the loan, the Bank still considers
the requested limit, as in the case of long-term lending there is an increased
inflation risk (especially for our country). In this case, you need a more
rigorous approach to assessing the net income of the borrower and correlate
calculations on inflation expectations.
Scoring is a mathematical or statistical model based on the credit
histories of other clients of the Bank is trying to determine how big is the
probability that a potential borrower repay the loan in time. There are
different types ñêîðèíãîâ, when analyzing the potential borrower may be
used:
• Application-scoring - assessment of the
creditworthiness of borrowers for reception of the credit;
•
Fraud-scoring - assessment of the likelihood of fraud potential borrower.
There are many models from scoring. Each one uses a different set of
factors characterizing the borrower, and gets as a result of its own threshold
for risk assessment, which allows the separation of the borrowers in the
category. The meaning of credit scoring is that every borrower is attributed to
the inherent only to the credit risk assessment. Comparing the values obtained
a particular borrower, with specific for each model of the scoring threshold
rating helps solve the problem of choice of lending, sharing borrowers into two
classes: those who can issue a credit, and those who issuance of loan is
contraindicated.
Scoring highlights those features that are most closely connected with
the unreliability or, on the contrary, reliability customers of a certain age,
profession, education, the same number of dependents, etc. But this is
discriminatory and scoring: the man on formal grounds close to the group with
bad credit most likely not be able to get a loan. These characteristics
conditionally divided into several criteria: personal (age, gender etc),
financial (income level, work experience etc), the associated information
(availability of the vehicle, land plot, etc).
As a rule, for calculating scoring magnitude banks use the following
basic data on the potential debtor: the level of average monthly income and
expenses, seniority on the last place of work, the General seniority, age,
marital status, number of persons kept, education, the official status of
ownership of liquid property.
The scoring model exists to 25 parameters; quality system takes into
account many factors and parameters. For each type of loan has its own method
of calculating scoring. Information about the criteria for the selection of
borrowers are inside information of the Bank, as their accessibility will
increase the share of fraud.
The indicator is compared with certain quantitative threshold
established by the Bank, which is a line break even. Accordingly, the loan can
count the client that the integral value of the data above that threshold.
Example of the scoring assessment:
|
Parameter |
Value of the parameter |
Scoring ball |
|
Age, year |
äî 20 |
20 |
|
21-25 |
38 |
|
|
26-30 |
70 |
|
|
31-35 |
82 |
|
|
36-50 |
95 |
|
|
51-60 |
110 |
|
|
îò 61 |
25 |
|
|
Family
status |
single (not married) |
110 |
|
married |
150 |
|
|
he is married, but live separately |
65 |
|
|
divorced |
90 |
|
|
widowed |
85 |
|
|
Number of the days |
no |
100 |
|
1 |
75 |
|
|
2 |
55 |
|
|
3 |
30 |
|
|
more than 3 |
10 |
|
|
kind of activity |
civil service |
110 |
|
private sector |
170 |
|
|
student |
80 |
|
|
pensioner |
30 |
|
|
Qualification |
no |
10 |
|
support personnel |
35 |
|
|
specialist |
85 |
|
|
employee |
100 |
|
|
leading employee |
140 |
|
|
Work experience, year |
up to 1 |
20 |
|
up to 2 |
40 |
|
|
up to 3 |
65 |
|
|
up to 5 |
90 |
|
|
more than 5 |
130 |
|
|
Average income, rub |
Less than 4000 |
15 |
|
4000-12000 |
65 |
|
|
12000-20000 |
110 |
|
|
20000-40 000 |
190 |
|
|
more than 40 000 |
210 |
In order to obtain a positive decision on the
loan, the borrower should collect not less than 700 points.
So, get to approximately 780 points will
borrower from 30 to 60 years old, married, no children, a specialist employed
in the private sector, with experience of up to 5 years and wages from 3 000 to
5 000 RUB. On a positive decision cannot expect the client under the age of 20,
single (never been married, without children, still a student, without
qualification with experience of up to 1 year and average monthly income of
less than 1 000 RUB.
So, we can summarize what factors impact on the
credit score:
• financial the position of the borrower,
monthly payments on the loan should not exceed 40-50% of the income of the
borrower);
• the
age of the customer (the majority of banks prefer to issue loans to people of
average age of 25-45 years.);
•
marital status;
•
availability of higher education;
• work
experience (employees, who often change their place of work, do not inspire
confidence among bankers);
•
additional sources of income (if they are, then they must be necessary to
specify, it will increase your chances of getting a loan);
•
additional property that is in your property (apartment, house, car, etc. - you
must provide the relevant documents to the Bank).
References:
http://www.mckinsey.com/global_locations/europe_and_middleeast/russia/ru/our_work/fig_case_study
http://www.businessstudio.ru/procedures/iso/bankqm/
http://www.e-xecutive.ru/knowledge/announcement/630488/