Credit Scoring and Bank Lending Policy in Consumer Loans
Φόρτωση...
Ημερομηνία
2015-03-12
Συγγραφείς
Τίτλος Εφημερίδας
Περιοδικό ISSN
Τίτλος τόμου
Εκδότης
Δικαιώματα
Default License
Άδειες
Παραπομπή
Ganopoulou Maria and Giapoutzi Fotini, 2010, Credit scoring and bank lending policy in consumer loans, Master's Dissertation, International Hellenic University
Παραπομπή
Περίληψη
Περίληψη
Consumer loan performance determines the profitability and stability of banks and other lending institutions and screening the loan applications is a key process in minimizing credit risk. Therefore, the primary problem of any lender is to differentiate between “low risk” and “high risk” debtors prior to granting credit. The main method used in assessing credit risks is the credit scoring analysis. The incentive of our research is the recent global financial crisis that erupted in September, 2008 which caused a dramatic reduction of loans granted by financial institutions. In this study a sample set of applications from a large Greek financial institution was focused on in order to estimate a credit scoring model for the consumer loans in Greece during the period 2007-2009. Taking into consideration that during a period of financial distress the banks‟ lending criteria change rapidly, we separated the full data into tree periods and estimated a probit model per year in order to examine the probability of granting a loan changes through years. Moreover, by constructing a bivariate probit model in order to avoid the sample selection effect, we analyzed how the borrower‟s characteristics influence the decision of granting consumer loans and their performance. Concisely, according to our empirical results, we verified that the probability as well as the criteria of granting a loan changes through years especially in periods of financial distress. Last but not least, we demonstrated that the financial institutions‟ lending policies are compatible with default risk minimization and thus it is important for banks in order to minimize default risk, to review the borrowers‟ creditworthiness periodically.