Credit Risk Assessment of Bank Asia Limited

Abstract

Credit risk stands out as a significant concern for commercial banks, arising from borrowers' failure to make regular loan payments due to either inability or unwillingness to adhere to the agreed terms. Genuine threat lies in the portfolio's performance which deviates from its anticipated value. A bank's book value is directly impacted by this risk; higher credit risks increase the chances of a bank becoming insolvent. More than 50% of risk factors in banks and financial institutions stem from credit risks alone worldwide. As a matter of fact, managing credit risk effectively has become a foremost task for financial institutions. Recognizing, assessing, alleviating, aligning, and overseeing are involved in credit risk exposures to ensure financial institution management is efficient. The report is based on a variety of data sources, including primary sources such as the three-month internship at Bank Asia Ltd. branch in Gulshan, interviews with the branch's officers and staff members of the bank, and work experience at several desks within the branch of myself. Official website, the annual reports, the operating manual for credit risk management, and various websites, published articles were used as secondary source. The report's findings show that it is crucial to a bank's profitability to maintain effective credit risk management. From the study it can be seen that Bank Asia Limited has implemented effective credit risk management practices, which have significant contribution to its profitability. Limitations are also highlighted in the study, which also includes difficulty banks face in sharing insider knowledge about them. The report provides valuable insights into the effectiveness of credit risk management practices through the statistical and financial analyses. The statistical analysis methods used here includes analysis of trends, ratio evaluation, analysis of multiple regressions, and testing hypothesis to get the idea. Financial analysis was also conducted by using important financial analysis. In a nut shell, this report provides a comprehensive analysis of the importance of effective credit risk management in the banking industry, which was specifically focused on Bank Asia Limited. Findings of the report can be used by other banks to improve their credit risk management practices and they could also enhance their profitability. The report's limitations and recommendations for future research provide a valuable contribution to the field of banking and finance.