CREDIT RISK MANAGEMENT CONTROL ON SME SEGMENT: STUDY CASE OF XYZ BANK BRANCH SURABAYA

Ludmila Mayasari, Eric Harianto, Riduan Mas’ud, Uzair Albazi, Nursaid Nursaid

Abstract


The study is conducted to explain the suitability of credit risk control management to minimize the non-performing loans at XYZ Bank Branch Surabaya as stipulated by the Basel Accord Committee in Financial Services Authority Regulation No. 18/PJOK.03/2016 about the Implementation of Risk Management for Commercial Banks. Based on the Basel III guidelines, credit risk management includes seven mechanisms. The seven mechanisms are the policy framework, credit risk rating framework, credit risk limits, credit risk modeling, credit risk mitigation, credit audits, and loan review mechanisms. The study uses a qualitative study by the case study approach. The results showed that the control of credit risk management implemented by Bank XYZ Surabaya Branch to minimize non-performing loans to individual debtors in the SME segment had not run effectively. It was primarily about the evaluation of credit risk, which led to the emergence of a new set of risks such as errors in credit risk evaluation, target market losses and ineffective allocation of loan funds, and inadequate strategies for collecting net credit to customers. The study also provides several recommendations for credit risk management as the strategy to reduce the risk of lending to individual debtors in the SME segment at XYZ Bank Branch Surabaya.

Keywords


Risk Management; Credit Risk; Financial Services Authority; Regulation

Full Text:

PDF

References


Adeusi, S. O., Akeke, N. I., Adebisi, O. S., and Oladunjoye, O. 2014. Risk Management and Financial Performance of Banks in Nigeria. European Journal of Business and Management, 6(31), 336-342.

Afriyie, S. O., Yusheng, K., Kaodui, L., Caesar, A. E., and Akomeah, M. O. 2018. Credit Risk Management System of Commercial Banks: An Analysis of The Process. European Journal of Accounting, Auditing and Finance Research, 6(6), 1-11.

Akram, H. and Rahman, K. U. 2018. Credit Risk Management: A Comparative Study of Islamic Banks and Conventional Banks in Pakistan. ISRA International Journal of Islamic Finance, 10(2), 185-205.

Anna, C. C., Rafele, C., and Grimaldi, S. 2015. Choosing Project Risk Management Techniques: A Theoretical Framework. Journal of Risk Research, 18(2), 232-248.

Australian/New Zealand Standard. 2004. Risk management AS/NZS 4360:2004. http://mkidn.gov.pl/media/docs/pol_obronna/20150309_3-NZ-AUST-2004.pdf

Bennouna, G. and Tkiouat, M. 2019. Scoring in Microfinance: Credit Risk Management Tool-Case of Marocco. Procedia Computer Science, 148, 522–531.

Borodacheva, L. V., Goloborodov, A. F., Guseva, A. I., Drozdova, A. A., and Glyzina, M. P. 2016. The Impact of the Global Financial Crisis on the Banking System of Russia. International Journal of Economics and Financial Issues, 6(1), 306-311.

Caruso, G., Gattone, S.A., Fortuna, F., Di Battista, T. 2020. Cluster Analysis for Mixed Data: An Application to Credit Risk Evaluation. Socio-Economic Planning Sciences, 10(8), 115-122.

Colquitt, J. 2007. Credit Risk Management: How to Avoid Lending Disasters and Maximize Earnings. New York: McGraw-Hill.

Creswell, J. W. 2014. Research Design: Qualitative, Quantitative, and Mixed Methods Approach, 4th Edition. Sage Publications Inc., California.

Das, A. and Ghosh, S. 2017. Determinants of Credit risk in Indian State-Owned Banks: An Empirical Investigation. Economic Issue, 12(2), 27-46.

Dell’Ariccia, G. and Marquez, R. 2016. Lending Booms and Lending. The Journal of Finance, 51(5), 2511-2546.

Desda, M. M. and Yurasti. 2019. Analisis Penerapan Manajemen Risiko Kredit Dalam Meminimalisir Kredit Bermasalah Pada PT. BPR Swadaya Anak Nagari Bandarejo Simpang Empat Periode 2013-2018. MBIA, 18(1), 94-106.

Dewi, M. K. and Anggono, A. H. 2013. The Analysis of Credit Policy Development in Bank AAA (Case of Implementation New Policy Architecture). The Indonesian Journal of Business Administration, 2(10), 1224‐1233.

Dexu, H. and M. Wenlong. 2016. Financial Exclusion and Inclusive Finance. China Economist. 11, 64.

El-Bannan, M. A. 2017. The Financial Crisis, Basel Accords and Bank Regulations: A Conceptual Framework. International Journal of Accounting and Financial Reporting, 7(2), 225-275.

Fernando, J. M. R. and Nimal, P. D. 2014. Does Risk Management Affect on Bank Efficiency? An Analysis of Sri Lankan Banking Sector. International Journal of Management and Sustainability, 3(2), 97-110.

Hasibuan, H. K., Utami, A. A., and Umam, K. 2019. Implementasi Manajemen Risiko Untuk Kredit Macet Konsumtif Di Bank Mandiri Kantor Cabang Jakarta Mampang Prapatan. Relasi: Jurnal Ekonomi, 15(2), 277-292.

Hudin, N. S. and Hamid, A. B. A. 2014. Drivers to the Implementation of Risk Management Practices: A Conceptual Framework. Journal of Advanced Management Science, 2(3), 163-169.

İncekara, A. and Çetinkaya, H. 2019. Liquidity Risk Management: A Comparative Analysis of Panel Data Between Islamic and Conventional Banking in Turkey. Procedia Computer Science, 158, 955-963.

Istrate, L. G., Ionescu, B. S., Haralambie, M. 2016. Aspect of the Impact of Interest Rate Development on the Probability of Default. Audit Financiar, 10(142), 1149-1156.

Kattel, I. K. 2016. Evaluating the Credit Risk Measurement Practices of Commercial Banks in Nepal. IOSR Journal of Business and Management, 18(3), 132-137.

Kessey, K. D. 2015. Assessing Credit Risk Management Practices in the Banking Industry of Ghana: Processes and Challenges. Global Journal of Management and Business Research: Finance, 15(5), 1-10.

Kiat, L.C. and Kumar, D. M. 2012. Case-Study: Credit Risk Scoring Models–A Best Practice Approach for Effective Risk Management in a Malaysian Bank. Research Journal of Commerce and Behavioural Science, 1(12), 18-27.

Kumar, P. and Kavita. 2016. Credit Risk Management System and Framework in Banking Sector. International Journal of Management and Social Science Research Review, 1(1), 131-136.

Lestari, D. 2018. Corporate Governance, Capital Reserve, Non-Performing Loan, and Bank Risk Taking. International Journal of Economics and Financial Issues, 8(2), 25-32.

Liberman, A. 2016. The Value of a Good Credit Reputation: Evidence from Credit Card Renegotiations. Journal of Financial Economics, 120, 644-660.

Miles, M. B., Huberman, A. M., and Saldana, J. 2018. Qualitative Data Analysis: A Methods Sourcebook. SAGE Publications.

Mohamed, K., Zhuwei, and Li, H. 2015. Commercial Bank's Performance and Credit Risk in Sierra Leone: Panel Evidence. Journal for Studies in Management and Planning, 1(2), 125-138.

Ntiamoah, E. B., Koranteng, E. O., and Brew, Y. 2014. Credit Risk Management: An Insight into Its Policies and Strategy Formulation. International Journal of Management Sciences and Business Research, 13(12), 55-58.

Otoritas Jasa Keuangan. 2016. Peraturan Otoritas Jasa Keuangan No. 18/PJOK.03/2016 tentang Penerapan Manajemen Risiko bagi Bank Umum. https://www.ojk.go.id/id/kanal/perbankan/regulasi/peraturan-ojk/Pages/POJK-Nomor-18.POJK.03.2016.aspx

Otoritas Jasa Keuangan. 2018. Laporan Profil Industri Perbankan. Jakarta: OJK.

Pham, H. L. and Daly, K. J. 2020. The Impact of BASEL Accords on the Management of Vietnamese Commercial Banks. Journal of Risk Management, 13(22), 1-13.

Sugiyono. 2016. Metode Penelitian Manajemen, Pendekatan: Kuantitatif, Kualitatif, Kombinasi (Mixed Method), Penelitian Tindakan (Action Research) dan Penelitian Evaluasi. Bandung: Alfabeta.

Wachira, A. K. 2017. Effects of Credit Risk Management Practices on Loan Performance of Commercial Banks in Nyeri County, Kenya. European Journal of Economic and Financial Research, 2(2), 1-12.

Yayuningsih, S., Y. Ramadiantio, J. F. Ananda, M. Butarbutar, S. Adhiarahmawati, Y. Hartono, Billi, G. Adiprawira, and P. Sidharta. 2020. Kajian Bersama Bagaimana UMKM dan Perbankan Dapat Sukses di Era Disrupsi Ekonomi dan Digital 2020 (OJK-BCG). OJK – BCG Joint Research. Departemen Penelitian dan Pengaturan Perbankan 2020.

Yin, R. K. 2017. Qualitative Research: From Start to Finish. New York: The Gildford Press.




DOI: http://dx.doi.org/10.21776/ub.jam.2022.020.02.17

Refbacks

  • There are currently no refbacks.