Loan demand operations in banks, the importance and application of the risk factor in the evaluation of loan demands

Offering loans occupies a significant place among the fuctions of banks. Real and legal persons who wish to use credit have to make necessary evaluations in order to choose both the credit type and the bank that they will use credit based on certain factors such as proliferation of credit types, increasing competition among banks, varying interest rates on loans. Banks are in a position of intermediary institutions in order to transfer the funds from the customers having surplus savings to the customers with deficit savings and therefore the banks must duly manage the risks they assume concerning the loans they make available while actively performing and fulfilling their duties and liabilities. Hence, a credit risk which is managed in a correct and efficient manner positively affects the profitability of banks. Banks, generally establish their own credit risk monitoring departments, in order to avoid problems regarding the loan facilities provided to their customers a credit risk management process, the first thing to accomplish is to define any possible risks which may be encountered. Thereby, banks are enabled to take effective measures in order to diminish the risks they assume in minimum levels or even to lower such risks to zero and this requires the banks to apply higher interest rates to customers having high levels of the risks and vice versa. Banks that are following-up such policies in an efficient and active manner are capable of successfully concluding and finalizing the said, credit risk management processes.