Credit risk end the credit risk prospect of Turkish banking sector

Banks are in the business of supplying credit and generate their income by charging interest from the borrowers. Credit risk is defined as the potential that a bank borrower or counterparty will fail to meet its obligations in accordance with agreed terms. Credit risk is the classic and the most important type of risk among the financial risks in banking business. Today, banks have developed specific methods to assess the borrower?s creditworthiness and modern risk evaluation and measurement methodologies to analyze, measure and manage the credit risk.The aim of this study is to examine the processes by which banks systematically assess, manage and counteract credit risk and to display the credit risk prospect of Turkish banking sector. In the first chapter of this study the basic elements of the credit process are displayed and the most common sources of risks that banks are exposed to are described. The following second chapter provides an overview of credit risk management process in banks. In this chapter it is explained that how banks determine their credit risk strategy and measure credit risk and the issue of the external and internal credit rating systems implemented in banks.The credit risk prospect of Turkish banking sector is evaluated in the last chapter. The statistical analysis in this chapter shows that Turkish banks pay the most attention to managing credit risk and they adequately counteract the exposure to credit risk. They have been able to manage credit risk in spite of the global financial crisis occured in 2007. The results of the having interview with six banks in Kütahya show that every bank has the credit risk management strategy and almost of them have the policy for credit risk. However the credit risk management tools used by Turkish banks vary from bank to bank, they used the lines of credit the most.Keywords: Credit, Credit Risk, Credit Risk Management, Turkish Banking Sector.