CREDIT RISK MANAGEMENT AS A COMPONENT OF FINANCIAL SECURITY

Abstract

The article examines the theoretical and applied aspects of credit risk management as a key factor in ensuring the financial security of banking institutions. It is substantiated that in conditions of increased financial market turbulence, dynamic changes in the banking sector, and growing uncertainty in the external environment, the effectiveness of credit policy directly determines the level of stability and competitiveness of a bank. It has been determined that credit risk is the dominant type of risk in the structure of banking operations, since lending activity remains the main source of asset and profit formation. The article reveals the evolution of scientific approaches to understanding the essence of credit risk – from a narrow interpretation as the probability of loan default to a comprehensive systemic approach that covers the processes of assessment, diversification, and control over the quality of the loan portfolio. The article considers the peculiarities of credit risks in banking activities, in particular, the risks of late payments, insufficient collateral, decreased asset liquidity, as well as risks caused by imperfect internal control and external economic fluctuations. Based on an analysis of current scientific research and risk management practices, a classification of credit risks from the perspective of a bank’s economic security is summarized. Internal and external factors influencing the formation of credit risk levels are identified, including the quality of credit analysis, the level of portfolio concentration, macroeconomic stability, changes in the regulatory environment, and the state of borrowers’ financial discipline. It is substantiated that the credit risk management process should be comprehensive and include three interrelated stages: assessing the borrower’s creditworthiness, determining the terms of lending, and continuously monitoring the fulfillment of obligations. It is shown that adherence to these stages minimizes the probability of losses and ensures the stability of the bank’s cash flows. The article determines that an effective credit risk management system is based on the use of modern scoring methods, rating analysis, the formation of reserves for possible losses, and the use of digital tools for monitoring the loan portfolio. It is concluded that credit risk management is a strategic element of banks’ financial security, ensuring a balance between profitability and riskiness of operations, optimization of asset structure, and reduction of problem debt. A rationally structured risk management system contributes to increased liquidity, strengthened customer and partner confidence, and the formation of long-term stability of the banking system.