CREDIT RISK MANAGEMENT EFFECTIVENESS ASSESSMENT ON THE BASIS OF INFORMATION FROM THE BUREAU OF CREDIT HISTORIES

The approaches of assessing the effectiveness of credit risk management are investigated. Two conceptual approaches are proposed for evaluation of efficiency. The first approach is based on using the benchmark, which is formed on the basis of a special set of credit risk indicators. The values of benchmark indicators are calculated on the basis of the Bureau of credit histories data. They represent, in a certain sense, average market values. The set of indicators includes the parameters of the borrower’s inflow and the indicators of loan portfolio delinquency. As an integral measure of risk management effectiveness for some lender, a special indicator is considered. This is an upper semi-quadratic deviation of the lender’s values from the benchmark`s values. The second approach of assessing the effectiveness is based on the audit of rejection correctness. The Credit bureau information allows analyzing borrowers that were rejected and the presence / absence of delinquency for new received loans. The rejected applications should be classified in two classes. The first class contains applications rejected on the basis of verification rules and procedures. The indicator of efficiency here is the level of incorrectly rejected loan applications. The second class includes applications rejected on the basis of the lender`s internal application scoring. The tool for scoring improvement is the re-calibration of weights. It is based on calculations of information values of scoring indicators on a consolidated creditor database and the Credit history bureau data of the rejected applications. The implementation of the proposed evaluation system depends on the degree of development of the Credit history bureau institution and the specifics of its functioning. The greatest effect is achieved in the case of transferring the full information from creditors to the Credit bureau and information exchange between bureaus.