THE EFFECT OF CHANGES IN RISK ANALYSIS METHODOLOGY TO MINIMIZE CREDIT RISK (CASE STUDY: PT BANK X)

• Main Author: Afif Kusumo (NIM: 190 04 069), Rakhmadi
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/6634
• Institution: Institut Teknologi Bandung

Abstract: <br /> <br /> <br /> <br /> Risk is a something that almost happens in everyday basis of business which could make loss. Still, in every risk there must be a return as a package with it. Since the development of knowledge, risk management is a rather new knowledge that began famously used for controlling the risk. Although, the improvements of tools of risk management the risk itself wont be hundred percent eliminated, those tools would only help to minimize. As for this research focuses on the credit risk in banks with the case study of Bank X the initial step of is through analyzing the literature and theories of risk management in banks. Banks business process is very closely related with risk especially credit risk since the cash flow operation of banks is actually by giving loans to their customer even though there are also other risk associated with banks like operational risk and market risk. The risk that bears in this case is, whether the consumer <br /> <br /> <br /> <br /> itself would pay back again the principle of loan with the interest. Many banks would implement <br /> <br /> <br /> <br /> different methodologies according to the policies and business. The purpose of this research is to <br /> <br /> <br /> <br /> see what methodologies that Bank X uses and differentiation with the theories. Bank X is one of the biggest public owned companies that were made by the Indonesian government in 1998. Right now, the banks has served in many big cities in Indonesia. The most interesting part of Bank X case is their capability of managed their non performing loans (NPL) during the years even though have touched a very risky level of unsettled loans at 2005 then decrease their NPL in the year 2006, even the at the latest information gather from quarterly report in 2007 also show a significant growth. Moreover, after further research going on, it is founded that they have changed the methodologiesof credit risk management system and which resulted in better performance in managing the loans. <br /> <br /> <br /> <br /> These changes didnt conduct by the old management there was a big restructuring in the human <br /> <br /> <br /> <br /> resources especially in the board of directors team during the crisis era. In addition this research <br /> <br /> <br /> <br /> finds that the methodology that were used is similar with the theories but with a modification. <br /> <br /> <br /> <br /> This research also resulted that the Bank X conditions is getting prepared for the BASEL II accord that must be implemented in 2008 as instructed by the central Bank of Indonesia. Also the <br /> <br /> <br /> <br /> methodologies that being used by Bank X are confirmed to improved the NPL performance. <br /> <br /> <br /> <br /> However the new method show a flaw in the process time that compared with the old system which is way faster. Nevertheless, this research also conclude that the people risk have a great role with the credit risk. Mismanagement from the human resource would give bad outcome. <br />