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Evaluating the Credit Risk Models in Banks with Customer Ethical Characteristics Approach
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Abstract: (4207 Views) |
Background: Despite the significance of credit risk within the activities of banks and financial institutes, it does not seem that any systematic and organized movement is underway towards creating specific credit risk models in Iranian economy. Meanwhile the ethical characteristics of customers can impose a significant effect on repayment of their liabilities; hence reducing the credit risk. Therefore, it is necessary to develop a comprehensive system of credit risk management for the banking system within the country. Rating the customers would enhance the profitability, increasing productivity and higher competitive advantage at long term. Having an efficient risk model and inclusion of customer ethical characteristics not only would facilitate decision making process regarding credits and accepting securities, but further reduces the costs of interactions and allows the banking system to benefit from an efficient pattern when allocating resources to various economic sectors.
Conclusion: The present paper uses the multi-level model techniques to analyze and explain this method of designing credit risk model for bank customers while considering customer ethical characteristics as a descriptive variable. As a result, a Logistic Regression Model with Multi-level approach can benefit from inclusion of customers' ethical characteristics as a descriptive variable along with other descriptive variables (such as the record of cooperation with the bank, revenues and financial ratios for corporate customers, etc.) which plays an important role in describing credit risk behaviors.
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| Keywords: Credit Risk, Multi-level Models, Ethical |
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Full-Text [PDF 176 kb]
(1568 Downloads)
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Type of Study: Research |
Subject:
Special
Received: 2018/06/15 | Accepted: 2018/06/15 | Published: 2018/06/15
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