The credit policy of the bank implies a set of basic tactical and strategic tasks that employees of the institution should rely on in the process of performing basic banking operations. Each lending 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’s worth figuring out why the bank’s credit policy is needed. It aims to improve organizational work, to achieve positive results, to improve financial performance and so on. Of course, commercial banks choose maximizing profits and increasing the level of trust on the part of citizens as the main guideline, while the Central Bank's lending policy is aimed at maintaining and developing all elements of the banking system, at regulating the exchange rate and inflation growth rates.
Commercial type credit organizations strive, on the one hand, to satisfy all the requirements and wishes of the client, and on the other hand, to provide increased profitability from lending operations. As we know, the more profitable the transaction, the higher the risk of loss on the loaned amounts. The credit policy of the bank establishes a balance between these interrelated categories, that is, the maximum risk level for specific operations is determined at which there is no threat of bankruptcy.
After developing the main provisions of the policy, the document is submitted for approval to all members of the Board of Directors. Accordingly, the responsibility for decisions taken lies with this governing body. Moreover, Council members are also required to monitor the implementation of the approved provisions in practice.
In the modern world, many large banks have come to the conclusion that it is necessary to introduce common goals and objectives, as well as develop common methods for achieving them. For this purpose, a special document called the “Memorandum of Credit Policy” is drawn up. It indicates global goals, sets the maximum and minimum amount of borrowed funds, and also identifies certain types of loans that are recognized as the most risky, and therefore, their issuance is not recommended.
The credit policy of the bank contains calculations of the main financial indicators characterizing the success of the organization for the period under consideration. In this regard, one should take into account the amount of equity, the availability of secondary reserves, for example, urgent deposit accounts, as well as the current economic situation of the country.
The most significant in our region is considered the monetary policy of the Bank of Russia, since it is based not only on the economy of the country, but also on the principles of activity of commercial credit institutions. This document includes the main provisions on which other credit organizations rely when developing their own policies. For example, the Central Bank establishes the amount of required reserves, which directly affects the level of interest rates for all types of loans.