The system of intrabank control as a way to prevent the emergence of problem loans in banks
Abstract
The article determines that the legislation of Ukraine lays down the concept of priority of debtor’s rights and such a situation provoke the irresponsibility of borrowers to fulfill their obligations and puts the rights of creditors and depositors in dependence on the borrower’s credibility. The purpose of this article is to evaluate the approaches to managing problem of loans of banks and to develop the system for preventing the occurrence of such indebtedness in banking institutions through the introduction of the internal banking control system. The tasks of the research are: the determination of approaches to the management of problem indebtedness of banks; providing a description of the methods for managing problem loans with their advantages and disadvantages; the formation of elements of intra-bank control as the system aimed at preventing the emergence of doubtful debts in the future. In the course of the research, the authors apply a systematic approach (for the formation of the structure of the internal banking control system); the methods of analysis and comparison (to assess existing approaches and the methods for managing bad debts). The authors highlight two main approaches to the problem of debt management and the advantages and disadvantages of using the methods of restructuring the problem loans of Ukrainian banks in the current economic conditions are highlighted. It is concluded that in order to prevent the emergence of problem loans in the future, it is necessary for commercial banks to introduce the system of early warning of the problem debt occurrence at the stage of assessment of the borrower's creditworthiness and the issuance of a loan that can be realized by creating the effective system of internal banking control. The formation of such a system involves the determination of the following components: the subject of control; the object of control; the goals and objectives of control; control actions that are implemented through the use of control tools. The introduction of the system of internal banking control in banks will result in reducing problem loans and the amount of credit risk, increasing the profitability of credit operations.
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