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Effectiveness of Credit Risk Management on the Financial Performance of Philippine Universal Banks

In: Business and Management

Submitted By marylethilagan
Words 1585
Pages 7
Effectiveness of Credit Risk Management on the Financial Performance of Philippine Universal Banks

Marylet H. Ilagan
Master in Business Administration
Lyceum of the Philippines University-Batangas
Effectiveness of Credit Risk Management on the Financial Performance of

Philippine Universal Banks

Banks are considered to be in the business to safeguard money and other valuable of the clients; provide loans, credit and payment services; and even offer investment and insurance products. This financial institution is also critical in handling and surviving different types of risks. The issue on credit risk has greater concern on the level of perceived risk from business conditions, since this risk most likely prompts bankruptcy. The turmoil in the banking industry highlights the effectiveness of credit risk management.

Credit risk management is a structured approach to managing uncertainties through risk assessment, developing strategies to manage it, and mitigation of risk using managerial resources (Achou & Tenguh, 2008). Its quality is the main indicator of the bank’s financial soundness. Boahene et all (2012) stressed that default of loans and advances shows serious setbacks not only for borrowers and lenders but also to the entire economy of a country. Studies of banking crises all over the world have shown that poor loans (asset quality) are the key factor of bank failures.

In one of the published report of Asian Banker Research (2011), Philippine banks are considered to have high consumer risk and slow loan demand. It only means that most of the Philippine banks are still slow on the growth level of their lending portfolio because of the gradual improvement in risk management and collection abilities. This relates on the poor and ineffective credit risk management emphasizing the...

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