The efficiency of Basel II credit rating system in detection of the non-performing credits: An application on selected firms

As credit has been the BASIC function of banking operations, credit risk was the first risk that had been defined. Managing credit risk in a functional way depends on how the banks adopt the understanding of credit management. Banks should choose the model/method suitable for their organization in order to realize a successful credit risk management process.Since the international financial markets, risk management practices and supervisory approaches each have undergone significant transformation, a new capital accord formation is needed. As the consequence of these factors, ? Basel II The New Capital Accord? is formed in order to provide approaches which are both more comprehensive and more sensitive to risks than the Basel I Accord.Basel-II is a crucial opportunity in order to provide financial consistency, effective and strong banking structure, which will consequently result effective risk management, to develop market discipline and increase capital adequacy measurement for the banks effectively.The credit risk, considering Basel II, is based on the existence of risk rating grate for every side having credit relations and the evaluation of this quality grate regarding the risk intervals.The analysis of Basel II criteria in detection of the non-performing credits which approaches the risks in banking system more sensitive and better emphasize the risk management will be carried out through samples at the last part of this thesis.