Credit Risk Management in Commercial Banks

Credit risk represents one of the most significant threats to the stability and profitability of commercial banks. Effective management of this risk, supported by prudential regulations, plays a crucial role in minimizing potential losses resulting from borrower insolvency. Th is article analyzes key credit risk management methods employed by commercial banks, with particular emphasis on prudential measures such as concentration limits, specific provisions, and capital requirements. It highlights the impact of provisioning on the bank’s balance sheet and income statement. Th e study also discusses the stages of credit risk management – from identification and measurement through control and monitoring to risk financing strategies. Both exogenous and endogenous factors influencing the level of credit risk are examined, and the importance of strategic approaches to its mitigation is underscored.