Emerging Market Bank Lending and Credit Risk Control - 1st Edition - ISBN: 9780128034385, 9780128034477

Emerging Market Bank Lending and Credit Risk Control

1st Edition

Evolving Strategies to Mitigate Credit Risk, Optimize Lending Portfolios, and Check Delinquent Loans

Authors: Leonard Onyiriuba
eBook ISBN: 9780128034477
Hardcover ISBN: 9780128034385
Imprint: Academic Press
Published Date: 10th August 2015
Page Count: 738
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Description

Using a framework of volatile markets Emerging Market Bank Lending and Credit Risk Control covers the theoretical and practical foundations of contemporary credit risk with implications for bank management. Drawing a direct connection between risk and its effects on credit analysis and decisions, the book discusses how credit risk should be correctly anticipated and its impact mitigated within framework of sound credit culture and process in line with the Basel Accords.

This is the only practical book that specifically guides bankers through the analysis and management of the peculiar credit risks of counterparties in emerging economies. Each chapter features a one-page overview that introduces its subject and its outcomes. Chapters include summaries, review questions, references, and endnotes.

Key Features

  • Emphasizes bank credit risk issues peculiar to emerging economies
  • Explains how to attain asset and portfolio quality through efficient lending and credit risk management in high risk-prone emerging economies
  • Presents a simple structure, devoid of complex models, for creating, assessing and managing credit and portfolio risks in emerging economies
  • Provides credit risk impact mitigation strategies in line with the Basel Accords

Readership

Upper-division undergraduates, graduate students, and professionals worldwide working in banking, financial intermediation, and regulation, especially in respect to emerging markets

Table of Contents

  • Statement
  • Dedication
  • About the Author
  • Preface
  • Acknowledgments
  • Part I. Background, the Setting and Perspective
    • Overview of the Subject Matter
      • Chapter 1. Questions in the Making of Emerging Economies and Markets
        • Learning Focus and Outcomes
        • Setting the Scene
        • Risk in Countries Evolving into Emerging Economies
        • Background—A Historical Perspective
        • Developed, Developing, and Emerging Economies
        • Lessons of the Asian Tiger, BRICS, and Tiger Economies
        • Strictly Defining Emerging Economies
        • Comparing Emerging Economies with Emerging Markets
        • Questions for Discussion and Review
      • Chapter 2. Conceptual Survey of Risk and Its Applications in Banking
        • Learning Focus and Outcomes
        • Creation of Risk—A General Overview
        • Defining Risk and Its Relationship to Uncertainty
        • Common Banking Risks in Emerging Economies
        • Bank Credit Risk Management Process—An Overview
        • Questions for Discussion and Review
      • Chapter 3. Insights into Bank Credit Risk Issues in Emerging Economies
        • Learning Focus and Outcomes
        • Defining Bank Credit Risk Crisis in Emerging Economies
        • The State of Banks Lending and Credit Risk Crisis in Emerging Economies
        • Bank Credit Risk Peculiarities of Emerging Markets
        • Culprits for Bank Credit Risk Crisis in Emerging Markets
        • Illegal Lending and Credit Fraud
        • Questions for Discussion and Review
      • Chapter 4. Putting the Bank Lending Process in Emerging Markets into Perspective
        • Learning Focus and Outcomes
        • Characterizing the Credit Process
        • Attracting Appropriate Credits
        • Letter of Application for Loan
        • Acknowledgment of Loan Application
        • Credit Checks and Inquiries
        • Credit Analysis
        • Credit Approval
        • Questions for Discussion and Review
      • Chapter 5. Bank Credit versus Equity and Economic Performance of Emerging Markets
        • Learning Focus and Outcomes
        • Issues in Raising Financing for a Business Venture
        • Plan and Private Placement for a Business Venture
        • Financial Appraisal of the Business Plan
        • Frustration of a Noble Business Plan
        • Economic Performance of Emerging Markets
        • Questions for Review and Discussion
  • Part II. Bank Credit Markets, Taxonomies and Risk Control
    • Sources of Lending Transactions and Credit Risk
      • Chapter 6. Market Analysis for Credit Risk Control in Emerging Economies
        • Learning Focus and Outcomes
        • Market Segmentation and Analysis
        • Retail Banking Sector
        • Consumer and Private Banking Sectors
        • Commercial Banking and Middle-tier Markets
        • Corporate Banking Sector and Customers
        • Government and the Public Sector
        • Questions for Discussion and Review
      • Chapter 7. SME Credit Risk, Analysis, and Control in Emerging Economies
        • Learning Focus and Outcomes
        • Defining Small and Medium-Sized Enterprises
        • Motivations of SME Entrepreneurs
        • Significance of SMEs for Emerging Market Economies
        • SME Attributes, Business Practices, and Credit Risks
        • SME External Financing Needs
        • Appraising an SME Project for Bank Lending
        • Abridged Feasibility Study of SME Business Venture
        • Constructing and Analyzing Financials for an SME Feasibility Study
        • Securing SME Credit Facilities
        • Questions for Discussion and Review
      • Chapter 8. Sectoral and Industry Credit Risk and Control in Emerging Economies
        • Learning Focus and Outcomes
        • Trading and Commercial Services
        • Agricultural Production and Risk Control
        • Manufacturing Industry Credit Risk and Control
        • Energy (Oil and Gas) Sector Credit Risk and Control
        • Telecommunications Sector Credit Risk and Control
        • Social Projects Credit Risk and Control
        • Questions for Discussion and Review
    • Short-term Lending and Recurrent Credits
      • Chapter 9. Advance, Overdraft, and Current Line Risks and Control
        • Learning Focus and Outcomes
        • Contrasts and Similarities
        • Direct Advance
        • Overdraft Facility
        • Business (Asset Conversion) Risk
        • Questions for Discussion and Review
      • Chapter 10. Margin Lending, Credit Risk, and Stock Markets in Emerging Economies
        • Learning Focus and Outcomes
        • The Stock Market: Going from Boom to Bust
        • Regulatory Intervention to Stem the Tide of a Hammer Blow
        • Defining Margin Lending
        • Benefits of a Margin Loan to the Borrower
        • Margin Lending Risks, Analysis, and Control
        • Questions for Discussion and Review
      • Chapter 11. Asset-Based Transactions, Lending and Credit Risk Control
        • Learning Focus and Outcomes
        • Overview of Asset-based Lending
        • Receivables Discounting Facility
        • Inventory Refinancing Facility
        • Purchase Order Finance
        • Risks of Purchase Order Finance
        • Questions for Discussion and Review
      • Chapter 12. International Trade Financing, Payments and Credit Risk Control
        • Learning Focus and Outcomes
        • Overview of Trade Finance
        • Nondocumentary Payment
        • Documentary (Letter of Credit) Payment
        • Risks of Lending and Mitigation
        • Questions for Discussion and Review
    • Medium and Long-term Lending
      • Chapter 13. Term Loan Structuring and Risk Control in Emerging Economies
        • Learning Focus and Outcomes
        • Lending versus Deposit Structure
        • Causes of Long-term Borrowing
        • Risk Analysis and Mitigation
        • Questions for Discussion and Review
      • Chapter 14. Mortgage Risks, Control, and Property Market in Emerging Economies
        • Learning Focus and Outcomes
        • Openings and Boom to Bust in Mortgage Lending
        • Assessing Borrowing Causes
        • Characterizing Mortgages
        • Risk Analysis and Mitigation
        • Other Credit Issues
        • Questions for Discussion and Review
      • Chapter 15. Lease Financing Risk and Control in Emerging Markets
        • Learning Focus and Outcomes
        • Meaning of Leasing and a Lease
        • Forms and Features of Leases
        • Finance Lease
        • Operating Lease
        • Other Lease Derivatives
        • Elements of a Lease Transaction
        • Risk Analysis and Mitigation
        • Optimizing Lease Portfolio
        • Questions for Discussion and Review
    • Hybrid and Irregular Credit Facilities
      • Chapter 16. Off-balance Sheet Bank Lending, Exposure and Risk Control
        • Learning Focus and Outcomes
        • Off-balance Sheet Credits and Risk Exposure
        • Bank Guarantee
        • Banker's Acceptance
        • Commercial Paper
        • Contract Finance, Risks, and Analysis
        • Questions for Discussion and Review
      • Chapter 17. Consumer and Credit Card Lending in Emerging Economies
        • Learning Focus and Outcomes
        • Overview of Consumer Loans
        • Credit Card Risks, Analysis and Control
        • Defining Credit Card Risk
        • Incidence of Default
        • Default Dynamics
        • Mitigating Credit Card Risk
        • Control of Credit Risk
        • Institutionalizing the Credit Card Process
        • Global Challenges for Banks in Emerging Economies
        • Lessons for Banks in Emerging Economies
        • Implications for Banks in Emerging Economies
        • Questions for Discussion and Review
      • Chapter 18. Micro Sector Credit Risk Control in Emerging Economies
        • Learning Focus and Outcomes
        • Scope of, and Need for, Microfinance Credits
        • Cultural Background
        • Risk Identification and Analysis
        • Mitigation of Risks of Microfinance Lending
        • Other Risk Control Measures
        • Questions for Discussion and Review
      • Chapter 19. Loan Syndication Risk and Control in Emerging Economies
        • Learning Focus and Outcomes
        • Causes of Syndication Lending
        • Meaning and Benefits of Syndication
        • Parties and Roles in Syndication
        • Categories of Syndication Deals
        • Legal and Other Documentation
        • Commitment, Fees, and Servicing
        • Risk Analysis and Mitigation
        • Questions for Discussion and Review
  • Part III. Credit Risk Dynamics, Analysis, and Management
    • Approach to Credit Risk Management
      • Chapter 20. Evolving Control of Bank Lending and Credit Risk in Emerging Markets
        • Learning Focus and Outcomes
        • Overview
        • Naive Lending Era
        • Awakening Stage
        • Regulatory Intervention
        • Financial Meltdown and Bailout
        • Reawakening Stage
        • Questions for Discussion and Review
      • Chapter 21. Emerging Markets and Debate on Framework for Credit Risk Control
        • Learning Focus and Outcomes
        • Credit Risk Framework Debate
        • Qualitative Principles versus Mathematical Models
        • Revisiting the Qualitative Approach
        • Questions for Discussion and Review
      • Chapter 22. Fine-tuning Principles of Bank Lending for Emerging Markets
        • Learning Focus and Outcomes
        • Tinkering with Qualitative Principles
        • Bulwark Against Credit Risk
        • Criteria of Contemporary Bank Lending
        • Cardinal Principles of Bank Lending
        • The Fine-tuning Required
        • Questions for Discussion and Review
    • Analytical Framework for Credit Risk Control
      • Chapter 23. Cash Flow Analysis and Lending to Corporate Borrowers
        • Learning Focus and Outcomes
        • Concept and Value of Cash Flow
        • Identifying Cash Flow Sources
        • Obtaining Cash Flow Information
        • Unique Attributes of Cash Flow
        • Elements of Cash Flow Analysis
        • Cash Flow Analysis Formulae
        • Cash Flow Debt Service Ratios
        • Illustrations and Analysis of Nigerian Breweries PLC
        • Questions for Discussion and Review
      • Chapter 24. Analyzing and Interpreting Financial Statement for Corporate Lending
        • Learning Focus and Outcomes
        • Assessing Business, Financial, and Performance Risks
        • Spread Sheet
        • Liquidity of the Borrower
        • Borrower's Leverage
        • Assets Utilization
        • Operating Efficiency
        • Cash Flow Position
        • Questions for Discussion and Review
      • Chapter 25. Bank Credit Structuring, Analysis and Approval in Emerging Markets
        • Learning Focus and Outcomes
        • Marketing and Relationship Issues
        • Factors Affecting Loan Structure
        • Elements of Loan Structure
        • Questions for Discussion and Review
      • Chapter 26. Emerging Market Issues in Structuring Bank Credit Facilities
        • Learning Focus and Outcomes
        • Bank's Commitment to Lend
        • Conditions Precedent
        • Representations and Warranties
        • Covenants of the Borrower
        • Events of Default
        • Qualities of Good and Well-structured Credit
        • Questions for Discussion and Review
      • Chapter 27. Credit Analysis Memorandum Fitted for Banks in Emerging Markets
        • Learning Focus and Outcomes
        • Aptitude of the Analyst
        • Meaning and Importance of a CAM
        • Elements of a CAM
        • Introduction: The Starting Point
        • Summary of Loan Terms
        • Borrower's Background
        • Ownership, Business, and Management
        • Proposed Credit
        • Transaction Dynamics
        • Market and Industry Analysis
        • Financial Analysis
        • Risk Analysis and Mitigation
        • Collateral Evaluation
        • Lending Rationale
        • Profitability Analysis
        • Ways-Out Analysis
        • Other Considerations
        • Recommendation
        • Questions for Discussion and Review
    • Loan Documentation, Review and Compliance
      • Chapter 28. Authorization and Responsibility for Bank Credit in Emerging Markets
        • Learning Focus and Outcomes
        • Credit Strategy Committee
        • Credit Approval Form
        • Credit Approval Issues and Options
        • Questions for Discussion and Review
      • Chapter 29. Security and Documentation of Credits in Emerging Economies
        • Learning Focus and Outcomes
        • Basis and Benefits of Security
        • Classifications of Security
        • Types of Security
        • Other Forms of Security
        • Problems of Security
        • Questions for Discussion and Review
      • Chapter 30. Administering Credit and Portfolio Risk in Emerging Markets
        • Learning Focus and Outcomes
        • Overview of Credit Admin
        • Need for Credit Administration
        • Bulwark Against Inefficient Lending
        • Rendition of Credit Returns
        • Credit and Market Reports
        • Administrative Framework
        • Contemporary Challenges
        • Making Credit Admin Work
        • Questions for Discussion and Review
    • Managing Non-Performing Credit Facilities
      • Chapter 31. Incidence and Crisis of Delinquent Loans in Emerging Markets
        • Learning Focus and Outcomes
        • Meaning of “Bad Debt” in Banking
        • Summary of General Observations
        • Critical Causes of Loan Default
        • Questions for Discussion and Review
      • Chapter 32. Demystifying Loan Default Warning Signs in Emerging Markets
        • Learning Focus and Outcomes
        • Unusual Customer Actions
        • Changing Loan Attributes
        • Third-Party Inquiries
        • Other Views on Loan Default
        • Implications for Bank Management
        • Effect on Market Competition
        • Banking Relationship Concerns
        • Questions for Discussion and Review
      • Chapter 33. Loan Workout and Remedial Actions for Banks in Emerging Markets
        • Learning Focus and Outcomes
        • Watch List Committee
        • Loan Remediation Actions
        • Primary Actions
        • Secondary Actions
        • Questions for Discussion and Review
      • Chapter 34. Proofed Strategies for Recovery of Bad Loans of Banks in Emerging Markets
        • Learning Focus and Outcomes
        • Stakes in Loan Recovery
        • Approaches, Options, and Strategies
        • Questions for Discussion and Review
      • Chapter 35. Obstacles to Recovery of Bad Loans in Emerging Economies
        • Learning Focus and Outcomes
        • Statement of the Problem
        • Large-Loan Exposures
        • Unsecured Lending
        • Compromising Loan Officers
        • Influential Borrowers
        • Flawed Legal System
        • Collusion with Bank Employees
        • Questions for Discussion and Review
  • Part IV. Asset Portfolio Quality, Risk and Control
    • Basel Accords and Credit Portfolio Issues in Emerging Economies
      • Chapter 36. Applications of Basel Accords in Emerging Economies
        • Learning Focus and Outcomes
        • Toward Basel I and Basel II Accords
        • Making of Basel Accords
        • The Basel Committee
        • Basel I Accord
        • Basel II Accord
        • Questions for Discussion and Review
      • Chapter 37. Bank Credit and Capital Regulation and Supervision in Emerging Economies
        • Learning Focus and Outcomes
        • Defining Issues in Banking Regulation in Emerging Economies
        • Autonomy for Banking Regulatory Authorities
        • Albatross for Banking Supervision
        • Revisiting the question of insider abuse
        • Basel Accords approach—Capital charges for credit risk
        • Basel Capital Accord
        • Regulation of bank capital in emerging economies
        • Regulating Bank Liquidity Risk in Emerging Economies
        • Regulatory Response to Failing Banks in Emerging Economies
        • Questions for Discussion and Review
      • Chapter 38. Bank Credit Portfolio Structure, Quality, and Returns in Emerging Economies
        • Learning Focus and Outcomes
        • Elements and Composition of Assets Portfolio
        • Credit Concentration and Risk
        • Portfolio Distribution and Maturity Profiles
        • Questions for Discussion and Review
  • Index

Details

No. of pages:
738
Language:
English
Copyright:
© Academic Press 2016
Published:
Imprint:
Academic Press
eBook ISBN:
9780128034477
Hardcover ISBN:
9780128034385

About the Author

Leonard Onyiriuba

Leonard Onyiriuba

Leonard Onyiriuba is a leading banker and author on banking. He started a career in banking in 1991 after a stint as a lecturer in the university. As a banker, he was at various times group head (commercial banking), regional director (Lagos), and divisional director (corporate banking). He currently runs a financial consultancy in Lagos, Nigeria - with a commitment to helping clients succeed. His books include “Analyzing and Managing Risks in Bank Lending” (2004), “Drive and Tasks in Bank Marketing” (2008), “Dictionary and Language of Banking” (2010), “Credit Risk: Taming a Hotbed of Reckless Banking” (2013), and “Banking Processing Risks and Control” (2014).

Affiliations and Expertise

NFS Data Bureau Limited, Lagos, Nigeria

Reviews

"Leo Onyiriuba has provided a valuable addition to the scant literature on credit risk management in African banks. The book’s strong focus on credit and portfolio risk management in emerging markets, management of non-performing credit facilities, establishment of sound bank lending principles, and interrelated key chapters make this a benchmark publication offering guidance and technical analysis of exactly what constitutes sound banking practice." --Morton Glantz, Fordham Graduate School of Business