Credit monitoring – is a system of bank control over the total process of crediting – it is manifested in the permanent control of passing individual credits, as well as the quality of the credit portfolio as a whole.
Monitoring can be of two types: monitoring of the borrower and monitoring of the lending bank.
Almost all the units of the bank participate in the monitoring of the borrower: legal, security, operational, if necessary – units engaged in foreign exchange operations and securities transactions, analytical, and others. Of course, the credit department plays the main role.
Credit officer must fix the control activities and give an account regularly about the work which has been done with the submission of the analytical conclusions about the level of risk for each credit, and credit manager – about a bank’s credit portfolio in general.
Watching for a credit is aimed at collecting information about the fund receiver during the period for which the loan is issued, to impose control over the alteration for the worse for the bank side of that data that is the basis for the primary assessment of the solvency of the borrower.
Monitoring of credit differentiates from the primary assessment of solvency:
- According to the time of commission. Credit check is carried out before issuing a loan, and the observation starts after the issuance of the loan;
- According to intended purpose. Credit check is conducted to identify risk before making a final decision on lending, and credit monitoring is performed to determine the credit risk over time,when the credit is issued;
- According to periodicity. Credit check is carried out in its original form once, and monitoring of credit is current, i.e. periodic or systematic;
- According to volume – when calculating the credit standing, reliability of the fund receiver and collateral is evaluated.
The goal of monitoring the loan is as follows:
Protection of the bank’s assets from losses;
Fulfilment of regulatory requirements of the Central Bank;
Observance of conditions of loan agreement;
Maintaining the credit standing of the debtor at the proper level;
Improving the quality of credit portfolio;
Timely organization working with troubled lenders.
The object of monitoring is observance of the loan agreement.
The bank pays attention to the timeliness of all documents provided in the contract (financial statements, certified by the Tax Inspectorate, the individual decoding to the balance sheet, etc.), checks the proper use of the loan, timeliness and fullness of payment of the main debt and interests.
Many people managed to take a loan for a house or a car, or anything else in those good times. And now they have to pay a definite amount of money each month. To be sure that everything is ok with your loan, use credit report monitoring. Of course, in most cases the things go well but don’t ignore credit monitoring – this is your financial safety.