THE MANAGEMENT OF CREDIT RISK ACCORDING TO INTERNAL RATINGS- BASED APPROACH

The internal ratings based approach (IRB Approach) was created as part of Basel II replacing the original Basle Accord of 1988 (Basle I) in an effort to create a better framework for regulating bank capital. This paper covers the methodology and components of the IRB Approach used to determine capital requirements for credit risk. Such an approach, which relies heavily upon a bank's internal assessment of its counterparties and exposures, can secure two key objectives consistent with those which support the wider review of The New Basel Capital Accord.. IRB approach should promote safety and soundness in the financial system and, consistent with providing incentive compatibility, that the structure and requirements of the IRB approach do not impinge upon or undermine banks' well-established lending and credit risk management practicesBasel II, credit risk, internal rating based approach;

POSSIBILITIES OF IMPROVING THE METHODS AND TECHNIQUES USED IN THE SURVEILLANCE OF CREDIT RISK MANAGEMENT

Through their daily activities, credit institutions are subject to various risks which could affect both the bank and the whole banking system, national and transnational. The activity field of the banks, marked by volatility, by the internationalization and liberalization of the financial markets, is in a continuous change. The contagion effect, as it has been proved by the spread of the financial crisis' effects, determines the surveillance authorities to pay increased attention to the financial risks and implicitly to the systemic risk. In this study, to start with, there shall be presented some aspects regarding the banking rating systems used by the surveillance authorities and then some ways of improving the models of managing credit risk in banks. In the end, there will be demonstrated that the risk profile of the banking institution has a determining role in the management of the credit portfolio.banking system, banking risk, surveillance, rating systems, credit portfolio, investment.

Considerations regarding credit portfolio risk management of the banking institution

Nowadays, the management of credit portfolio is becoming more and more sophisticated, the evaluation and management techniques are being used on a larger and larger scale in order to respond as efficiently and promptly as possible to the associated risks. Romania is, can we say, “at the beginning” as far as the management and the prevention of the risks caused by the credit portfolio are concerned, “beginning” that is although the result of an already experimented and accumulated experience. Embracing the new and modern credit risk management models presupposes the existence of some databases for a sufficient period of time, regarding the probability of different credit events [1], redeem rates in the case of non-reimbursement. We cannot adopt some management models without taking into consideration the characteristics of our country’s economy. To start with there shall be presented some conceptual perspectives of the credit risk. Afterwards, there shall be described some determining factors in the formation of a credit risk. In the end, there shall be presented the impact of the economic crisis upon lending and, last but not least, upon the credit portfolios of the banking institutions.banking system, banking risk, surveillance, rating systems, credit portfolio, investment

POSSIBILITIES OF IMPROVING THE METHODS AND TECHNIQUES USED IN THE SURVEILLANCE OF CREDIT RISK MANAGEMENT

Through their daily activities, credit institutions are subject to various risks which could affect both the bank and the whole banking system, national and transnational. The activity field of the banks, marked by volatility, by the internationalization and liberalization of the financial markets, is in a continuous change. The contagion effect, as it has been proved by the spread of the financial crisis effects, determines the surveillance authorities to pay increased attention to the financial risks and implicitly to the systemic risk. In this study, to start with, there shall be presented some aspects regarding the banking rating systems used by the surveillance authorities and then some ways of improving the models of managing credit risk in banks. In the end, there will be demonstrated that the risk profile of the banking institution has a determining role in the management of the credit portfolio