Credit policy of the bank

The credit policy of the bank implies a set of basic tactical and strategic tasks for which the institution's employees must rely in the process of performing basic banking operations. Each credit institution independently develops such a policy depending on the objectives of the activity, as well as regional, political and social factors.

First of all, it is worth investigating why the credit policy of the bank is necessary. It is aimed at improving organizational work, achieving positive results of operations, improving financial performance and so on. Of course, commercial banks, as the main reference point, choose profit maximization and increase the level of trust on the part of citizens, while the Central Bank's lending policy is aimed at maintaining and developing all elements of the banking system, regulating the exchange rate and the rate of inflation.

Commercial type credit organizations strive, on the one hand, to satisfy all the requirements and wishes of the client, and on the other, to ensure an increase in the profitability from the implementation of credit operations. As we know, the more profitable the transaction, the higher the risk of loss on the loaned amounts. The bank's credit policy establishes a balance between these interrelated categories, that is, the maximum level of risk for specific transactions is determined, in which there is no threat of bankruptcy.

After the development of the main policy provisions, the document is given for approval to all members of the Board of Directors. Accordingly, responsibility for the decisions taken lies with this management body. Moreover, Council members are also required to monitor the implementation of approved provisions in practice.

In today's world, many large banks have come to the conclusion that it is necessary to introduce common goals and objectives, as well as to develop common methods for achieving them. To this end, a special document is being drawn up, called the Memorandum on Credit Policy. It identifies global goals, establishes the maximum and minimum amount of borrowed funds, as well as identifies certain types of loans that are considered the most risky, and therefore, their issuance is not recommended.

The bank's credit policy contains calculations of the main financial indicators that characterize the success of the organization's activities over the considered period of time. In this regard, one should take into account the amount of own funds, the availability of secondary reserves, for example, time deposit accounts, as well as the economic situation of the country at the moment.

The most significant in our region is the monetary policy of the Bank of Russia, as it builds not only the economy of the country, but also the principles of the activity of commercial credit institutions. This document includes the main provisions on which other credit institutions rely when developing their own policies. For example, the Central Bank sets the amount of mandatory reserves, which directly affects the level of interest rates for all types of loans.