Credit risk management in banking sector: An application of variables determining credit risk in Turkish banking sector

It is thought that increasing credit demand by growth increase credit amount which is required by individual and institutional investors. In this context, it is said that how the banks should manage their credt risk and which financial ratios have close relation to credit risk are important.The main purpose of this study is to determine financial ratios related to credit risk of banks operating in Turkey and to give general information about measure and management of credit risk of Banks. For this, it is aimed to determine and interpret the financial ratios related to credit risk of banks operating in Turkey in the years between 2007-2010. Logistic regression analysis has been used to determine the financial ratios related to credit risk. At the end of this study, provision for decrease in value of credit and other receivables devided by total assets ratio has been found as a relative to credit risk for the first three years. Besides, in 2007, specific reserve devided by gross non-accruing loans, in 2008, liquid assets in foreign currency devided by total liabilities in foreign currency, in 2009, liquid assets in foreign currency devided by total liabilities in foreign currency and in 2010, financial assets devided by total assets and long-term assets devided by total assets have been found as significant variables related to credit risk.Key Words: Risk and Diversification, Credit Risk Management, Credit Risk Measure Methods, Logistic Regression Analysis.