Nikolaieva O.N., PhD in Government Administration, Assistant Professor

Belykh D.A.

Makeyevka Institute of Economics and Humanities

MANAGEMENT MECHANISMS OF COMMERCIAL BANK CREDIT PORTFOLIO RISK

Crediting is the most profitable and simultaneously the most risky aspect of bank operations. Non-payment of loans, especially large, can lead a bank to bankruptcy, and due to its position in economics, to a number of bankruptcies of the enterprises, banks and private persons connected with it. Hence, working out the effective mechanism of an estimation and regulation of bank cumulative credit risk is an actual task.

The research of theoretical aspects of the above-mentioned problem has allowed us to develop the concept of the estimation and regulation mechanism of the bank credit portfolio risk. The essence of the given concept presupposes that it is possible to almost precisely reveal, estimate and predict the level of credit portfolio risk in due time by means of various methods and mechanisms. In its turn it will give the chance to choose the best opportunities on elimination of its negative influence on the bank activity.

The creation of the regressional model of the bank credit portfolio risk forecasting has allowed defining the expected level of the bank cumulative credit risk which depends on the change of the delayed debt share in the bank credit portfolio. The usage of the offered approach will also allow planning the structure of the credit portfolio which is important in bank liquidity management.

The mechanism of the bank credit portfolio risk regulation presupposes the usage of such methods as diversification, concentration, limitation, reservation and securitization. The correct choice of the method in the bank credit activity depends on the complex estimation results, the forecast of the credit portfolio risk change, and besides, the bank financial condition and development strategy. Thus, it is necessary to take into consideration the fact that the optimum parity between the diversification and concentration levels is defined through limitation which is connected with standard and substandard credit operations. If the bank deals with hopeless credits and doesn't wish to write them off at the expense of its own means at the end of the last day of the month, it should use the securitization mechanism. But anyway, the bank should create reserves to cover possible losses on credit operations.

We checked the above-mentioned models in the activity of "Ukrsotsbank" commercial bank which offers the full complex of bank services both in the internal and external financial and credit markets. The bank has got the considerable experience in the work with the enterprises irrespective of their branch and type of ownership. The bank carries out operations according to the National Bank of Ukraine license. They are, first and foremost, credit and depositary operations, settlement and cash service and operations with securities.

Nearly 55 % of bank profit is provided by credit operations. The basic directions of crediting are building, agriculture, coal industry, trade, crediting of physical persons etc.

In the result of the complex system usage of the cumulative credit risk estimation it has been found that the moderate risk level prevails in the bank credit portfolio during the last two years, at which in 2009 the bank had losses equal to 340,000 UAH (11 % of credit operations incomes), and in 2010 it came to 430,000 UAH (15 %), and the credit operation profitableness in 2010 has fallen to 24 %. However to minimize the credit risk level and to improve the bank credit portfolio quality it is necessary to foresee its possible change.

The approbation of the bank cumulative credit risk forecasting model has allowed to determine that at the end of the first quarter of 2011 the risk level will decrease by 0,2 % at the expected decrease in non-standard debt volume of 15,000 UAH (4 %), and standard debts of 108,000 UAH (3 %). Such minor alterations define the necessity in the acceptance of effective decisions on the risk level minimization and the improvement of the bank credit portfolio quality.

In the paper it was offered to lower the proportion of negatively classified credit operations in the bank credit portfolio volume on the average by 9 % by means of crediting limits toughening, credit operations regular monitoring and the credit portfolio in the whole. As a result of the given recommendations the delayed debt volume will decrease at 26,000 UAH, the credit risk level will reduce by 2 %, the credit operation profitableness will raise twice, and the losses in these operations will decrease by 20 %.