Risk-Based Lending
Functions of Credit risk Grading
Well-managed credit risk grading systems promote bank safety and soundness by facilitating informed decision-making. Grading systems measure credit risk and differentiate individual credits and groups of credits by the risk they pose This allows bank management and examiners to monitor changes and trends in risk levels. The process also allows bank management to manage risk to optimize returns.
Good - (GD) - 2 Strong Bank Very good Financials Very good management skill & expertise. Excellent operating environment Strong capability for timely payment of financial commitments Aggregate Score of 75-84 based on the Risk Grade Score Sheet
Non-Bengali entrepreneurs and the public sector nearly monopolized economic activity in the Pakistan era. Of the very few Bengali business professionals active in East Pakistan fewer yet survived the war. Post independence Bangladesh therefore presented a unique set of opportunities and problems for the private sector. The good news was that without the stranglehold of the elite Pakistani business families the field was wide open for the development of a homegrown Bengali private sector; but the bad news was that both a capital base and an entirely new entrepreneurial class would have to be developed out of an economic vacuum.
Capital formation rapidly occurred and the newly nationalized banks, awash in deposits, found themselves with a serious asset management problem because there were few professional entrepreneurial risk takers with business skills and proven track records to whom this capital could be made available under normal and prudent banking practice.
To get the ball rolling, the government of Bangladesh (GOB) relaxed capitalization restrictions on banks and at the same time directed the state-owned banks to disregard normal credit requirements and to reach given loan portfolio targets on a timetable. The anticipated high default rate on these loans was
Well-managed credit risk grading systems promote bank safety and soundness by facilitating informed decision-making. Grading systems measure credit risk and differentiate individual credits and groups of credits by the risk they pose This allows bank management and examiners to monitor changes and trends in risk levels. The process also allows bank management to manage risk to optimize returns.
Good - (GD) - 2 Strong Bank Very good Financials Very good management skill & expertise. Excellent operating environment Strong capability for timely payment of financial commitments Aggregate Score of 75-84 based on the Risk Grade Score Sheet
Non-Bengali entrepreneurs and the public sector nearly monopolized economic activity in the Pakistan era. Of the very few Bengali business professionals active in East Pakistan fewer yet survived the war. Post independence Bangladesh therefore presented a unique set of opportunities and problems for the private sector. The good news was that without the stranglehold of the elite Pakistani business families the field was wide open for the development of a homegrown Bengali private sector; but the bad news was that both a capital base and an entirely new entrepreneurial class would have to be developed out of an economic vacuum.
Capital formation rapidly occurred and the newly nationalized banks, awash in deposits, found themselves with a serious asset management problem because there were few professional entrepreneurial risk takers with business skills and proven track records to whom this capital could be made available under normal and prudent banking practice.
To get the ball rolling, the government of Bangladesh (GOB) relaxed capitalization restrictions on banks and at the same time directed the state-owned banks to disregard normal credit requirements and to reach given loan portfolio targets on a timetable. The anticipated high default rate on these loans was