Credit risk management in commercial banks

Abstract

Credit risk management in commercial banks is a fundamental aspect of financial stability and sustainable banking operations. Credit risk, which refers to the possibility that borrowers may fail to meet their obligations as agreed, is among the most significant risks faced by banks worldwide. Given that lending activities constitute a core function of commercial banks, effective management of credit risk is crucial for minimizing potential losses and ensuring the overall health of the banking sector. The importance of credit risk management has been underscored by numerous banking crises globally, where inadequate assessment and control of credit exposures have led to significant financial distress and, in extreme cases, bank failures.