Lenders look at a variety of factors in attempting to quantify credit risk.
Three common measures are probability of default, loss given default, and exposure at default.
Probability of default measures the likelihood that a borrower will be unable to make payments in a timely manner..
The Credit Risk Grading (CRG) is a collective definition based on the pre-specified scale and reflects the underlying credit-risk for a given exposure.
A Credit Risk Grading deploys a number/ alphabet/ symbol as a primary summary indicator of risks associated with a credit exposure..
Loan Classification
All the loans and advances are grouped into four categories for the purpose of classification, which are: (i) Continuous Loan (ii) Demand Loan (iii) Fixed Term Loan and (iv) Short-term Agricultural and Micro-Credit..
The Credit Risk Grading (CRG) is a collective definition based on the pre-specified scale and reflects the underlying credit-risk for a given exposure.
A Credit Risk Grading deploys a number/ alphabet/ symbol as a primary summary indicator of risks associated with a credit exposure..
The Credit Rating Agency of Bangladesh has assigned its highest credit rating, "AAA", for Eastern Bank Limited (EBL), which denotes an extremely strong capacity to meet financial commitments..
If a Bank has its own well established risk grading system equivalent to the proposed credit risk grading or stricter, then they will have the option to continue with their own risk grading system.
Credit Risk Grading for each borrower should be assigned at the inception of lending and should be periodically updated.
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.
Credit Risk Grading is the basic module for developing a Credit Risk Management system. 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 CRMG however, was not detailed enough for banks to fully implement a RGS.
Therefore in January 2004, BIBM was instructed by Governor Bangladesh Bank to produce a Credit Risk Grading Manual (CRGM) based on the Core Risks Management Guidelines.
BIBM constituted a Focus Group for this purpose.
