ISSN:
2181-3906
2024
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 3 / ISSUE 3 / UIF:8.2 / MODERNSCIENCE.UZ
894
OVERSEAS EXPERIENCE OF RISK ASSESSMENT OF COMMERCIAL BANKS
G. Turdyeva
doc., Karakalpak State University
M. Abishov
doc., Karakalpak State University
U. Allambergenova
Student, Karakalpak State University
https://doi.org/10.5281/zenodo.10887892
Abstract.
In this article, thanks to the study of the banking systems of developed countries,
sufficient importance is given to monitoring commercial banks, identifying negative changes in
the practice of their activities, as well as scientific improvement of methods for the timely and
coordinated application of control actions.
Key words:
Risk assessment and rapid action systems, CAMEL system, assessment and
analysis of financial condition.
ЗАРУБЕЖНЫЙ ОПЫТ ОЦЕНКИ РИСКОВ КОММЕРЧЕСКИХ БАНКОВ
Аннотация.
В данной статье, благодаря изучению банковских систем развитых
стран, достаточное значение уделяется осуществлению контроля коммерческих банков,
выявлению негативных изменений в практике их деятельности, а также научному
совершенствованию методов своевременного и скоординированного применения
управляющих воздействий.
Ключевые слова:
Системы оценки рисков и быстрых действий, система CAMEL,
оценка и анализ финансового состояния
.
In most developed countries, banking systems are objects of increased control and
inspection compared to other systems of the economy, because commercial banks are responsible
for the protection of the interests of national agencies, commercial enterprises and individuals who
are their clients. In that place, the Central Bank defines the future and development strategy of the
commercial banks in order to ensure credit operations that meet the requirements of the time. The
main goal in the field of the credit system is to provide services to clients in the form of effective
credit risk management of the bank, to ensure the financial stability of the banking system, and to
develop the economy, which is the main goal of the services of commercial banks. The most
effective way to achieve this is the effective management of credit risks.
Globalization of economic processes, development of information technology has a
significant impact on banking business. Global computerization, the expansion of the network of
Internet technologies gave an opportunity to create effective systems for providing accounting
services to customers, speeding up accounting and payments, and increasing the control of cash
flows. Assisted in the introduction of new banking products. At the same time, these changes led
to the diversification of risks in banking activities. In such a situation, the banking offices also
introduce new approaches to the assessment and analysis of the financial situation. Necessary
changes have occurred in the assessment of the financial stability of banks by supervisory
authorities in various countries. They have the following properties:
ISSN:
2181-3906
2024
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 3 / ISSUE 3 / UIF:8.2 / MODERNSCIENCE.UZ
895
1. Currently, the main attention of supervisory authorities is focused on the risks of
banking activity. Implementation of standardized assessment of management and internal control
quality in control approaches and systems. At the moment, remote monitoring of such factors may
not provide sufficient resolution. Therefore, on-site inspections in many countries attract more
attention. Uses the practice of holding meetings with the heads of commercial banks.
2. Control organizations are developing statistical models of "high-speed traffic systems".
The main purpose of these models is to identify possible problems in the activity of commercial
banks and establish effective control to avoid them [1].
In the practice of control work in the USA and European countries, there is a comparison
of the methods of assessment of the existing conditions of commercial banks, as well as prediction
models, while the rapid action system works. The purpose of such a structure of the control system
is to be constantly aware of the organization's activities. In this way, it is possible to influence the
problematic areas of the bank's activity and make effective decisions. The special system includes
a continuous process, from determining the control period of commercial banks' activities and
developing a program for it, to determining the efficiency of its implementation and evaluating the
bank's activities in this period. There are necessary similarities in the evaluation systems of the
commercial banks of the supervisory authorities of different countries, which mainly include the
following:
- the possibility of conducting on-site inspections, their frequent conduct and inclusion;
- remote control systems;
- types and content of reports to be adopted as part of control;
- availability of other sources of information;
- excellent technical equipment [2].
Risk assessment and rapid action systems have been introduced in various countries since
1980. We can see it in 1-table.
1-table
Risk assessment and rapid employability in different countries [1.4]
Country and regulatory
authority
Systems and year of
introduction
System type
French Banking Commission
ORAP (Organization and
Fixation of Risk Prevention
Actions), 1997 SAABAA
(Statistical Method for
Aggregate Analysis), 1997
1997 Distance rating system
Quick action system expected
damage
Germany: Federal Office for
Banking Supervision
BAKIS (Information
System), 1997
Analysis system of financial
coefficients and groups of
some banks
Italy: Bank of Italy
PATROL, 1993 A rapid
employability system has
been developed
Remote rating system Rapid
employability system predicts
deterioration
ISSN:
2181-3906
2024
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 3 / ISSUE 3 / UIF:8.2 / MODERNSCIENCE.UZ
896
Netherlands : Bank of the
Netherlands
RAST (error estimation
tools), 1999
system in
evaluation development
Aggregate system of bank
risk assessment Analysis
system of financial
coefficients and some
banking groups
United Kingdom:
Organization for Financial
Policy
RATE (risk assessment and
regulatory framework), 1998
Monitoring model of some
banks, 1980
Aggregate system of bank
risk assessment Analysis of
financial coefficients
USA: Federal Reserve
System
SEER Rating, 1993 SEER
Risk Rank
Quick Action System
Prediction Ratings
Assessment of rapid
movement system
deterioration
USA: Federal Deposit
Insurance Corporation
CAEL, 1985 (1999 revised
in) SCORE (statistically
calculated CAMELS rating in
the field of remote control),
1995
Bank control remote system
The rapid motion system has
progressive dynamics.
USA: Money Circulation
Management
Bank Calculator (in progress)
The rapid action system is
divided into cases
U.S.A.: Uchtalarevlik
Khodalawangan
CAMELS, 1998
Rating system based on on-
site inspection
As can be seen from the list, banking risk assessment systems supported in developed
countries can be classified as follows:
- rating evaluation systems of commercial banks;
- remote monitoring (calculation of financial ratios and analysis of bank groups);
- statistical systems of risk systems in banking activity;
- statistical models of rapid motion systems.
The most widely recognized rating system in the world is the CAMEL system, created in
the USA (1979). Its main components are capital adequacy (C), asset quality (A), management
quality (M), profitability (E) and liquidity (L). Since 1997, when determining the rating price of
banks, this system began to take into account the sensitivity to market risks (S). Thus the CAMELS
system was born.
Each component of the rating system provides an assessment of the bank's activity based
on the analysis of several factors affecting this component. Some factors are classified as several
elements in the system. This means that the components that serve as a criterion for assessing the
bank's risk are interrelated. For example, the degree of difficulty of the participants is used both in
the assessment of bank capital adequacy (C) and in the assessment of the quality of participants
(A). The final rating and the quantitative assessment of each component rating are carried out on
a 5-point scale. The 1st rating is a high indicator and indicates that the commercial bank has a
ISSN:
2181-3906
2024
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 3 / ISSUE 3 / UIF:8.2 / MODERNSCIENCE.UZ
897
strong position in the market. Hence, it can be very little monitored by bank supervisory
organizations. The lowest rating of 5 means that the bank is in a crisis state, the quality of
management is low, and there is a need for urgent intervention and corrective actions by
supervisory organizations.
Remote monitoring systems are used in many countries to control the activities of
commercial banks. The conditions for the operation of commercial banks are related to various
changes that occur both inside the bank and on the external market. To take them into account, it
is necessary to determine the dynamic changes of one-line indicators and coefficients by groups
of banks. If the calculated indicator exceeds the specified lowest level, is in the dangerous range
or has decreased compared to the indicators of the previous period, the analysis of financial
indicators allows to determine the dangerous situation zone for the bank.
Analysis of banks by groups is carried out on the basis of financial indicators of groups of
banks separated by a certain character. This makes it possible to determine whether or not a bank
in a particular group has completely different working capacity from the banks in the group, and
to find out the reasons for the existing difference. Banks are divided into groups according to
various characteristics, namely, the number of active participants or the segments they work in.
The bank's indicators are compared with the existing indicators in the group, and banks with
declining dynamics are identified. In the late 1980s, the US Federal Reserve developed a system
of monitoring certain banks to identify problematic banks. 39 financial, 35 market indicators
(indicators) are studied in this system. In this way, it was possible to identify problematic changes
in banking activity. This ensures that issues that are of particular importance are identified in the
next inspection.
BAKIS information system was introduced in Germany in 1997 by the Federal Office for
Banking Supervision and the Fund’s bank. It is a standard system for rating banks. The purpose of
this innovation is to quickly analyze the bank's financial situation, to identify trends in the level of
credit, market and liquidity risk, and therefore to search for the main trends in the development of
banking groups and the entire banking system. In the BAKIS information system, 47 indicators
are calculated and analyzed on a monthly, quarterly, half-yearly and annual basis in accordance
with a special program. These indicators include 16 credit risk indicators, 2 liquidity risk indicators
and 10 profit risk indicators. The expert compares specific bank indicators with the indicators of
banks belonging to the group [3].
In recent years, remote control systems have turned from the calculation of some indicators
for the purposes of control audits into a means of assessing the daily risks in the banks' activities.
It is actively and effectively used as a supplement to the existing control system, aggregating
indicators in various statistical formats.
Risk assessment systems in the banking activity consist of a stable process, which
continues from the initial familiarization with the situation of the bank to the determination of the
effectiveness of the control measures, the stages of which are interrelated and complement each
other. The approach is based on assigning weight coefficients to each of the banks and banking
groups, and then evaluating each unit by type of risks and categories of risk control. The values of
each unit are compared to the values of the groups of higher levels, and then the position in the
ISSN:
2181-3906
2024
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 3 / ISSUE 3 / UIF:8.2 / MODERNSCIENCE.UZ
898
bank or group of banks is evaluated. This approach is currently being used in the UK and the
Netherlands.
In the Netherlands, the allocation of large alliances in the Risk Aggregation Analysis
System (RAST) is based on expert judgment. In this case, each unit covers more than 10 percent
of the relevant indicator (income, profit, capital). The analysis of additional aspects of activity can
be added at a level that is less important for the bank. But they should have the necessary
importance for the point of control organizations - the bank under review. The same procedure is
applied if their stable growth dynamics are observed or if they cause a serious risk.
The weighting of each organizational unit and type of functional capability is related to the
formation of quantitative indicators or the risk of risk, and is classified as low, medium and high.
Bank of the Netherlands 10 types of risk that a commercial bank may face (credit, valuations,
interest rates, swap operations, loss of liquidity, transfer of operations, information, strategy, use
of laws, reputational risks) and risk over distinguishes control from interest rate category (internal
control, organizational factor and management). Risks are evaluated on a 4-point scale (1 point-
low-level risk).
In general, the use of statistical methods "Preliminary detection systems" in the control of
banking activities will be widely used in foreign countries in the next 5-7 years. At the moment,
statistical models are conditionally divided into three groups: models that provide rental
predictions and models that evaluate the probability of changes in rating indicators (SEER and
SCORE systems in the USA). Models that predict the bankruptcy of financial institutions (SEER
Risk Rank Bank Calculator in the USA, System of advance prediction in Italy), models of
predictable losses (SAABA in France). It is clear that it is appropriate to use such systems to
control commercial banks, identify negative changes in their operation practices in advance, and
apply control actions in a timely and coordinated manner.
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ISSN:
2181-3906
2024
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 3 / ISSUE 3 / UIF:8.2 / MODERNSCIENCE.UZ
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