Tuesday, May 3 2011 14:25
ARARATBANK introduces own scoring system
ArmInfo. ARARATBANK has introduced its own scoring system for business loan analysis. The new system has no analogues in Armenia and it is adjusted to local borrowers, Deputy Head of the ARARATBANK Corporate Banking Department Rostom Badalyan told ArmInfo. "Scoring is based on the statistical calculations and analytical surveys, which makes it possible for us to analyze the statement of a borrower and its creditability," R. Badalyan said.
The key achievement of the new system, he said, is a significant reduction of the loan risk, which will improve the quality of the loan portfolio and, in fact, increase the bank's incomes from lending. "Despite the tangible growth of the loan portfolio in Q1 2011 the level of bad loans fell," Badalyan said. By late 2011 this indicator will not exceed even 1%, he said.
The scoring system development by ARARATBANK not only allows estimating the borrowing capacity of potential customer, it is also a peculiar barrier or filter against problematic borrowers. The given scoring system allows applying price-making policy meeting possibilities of every customer. At the first stage of credit scoring the credit history and financial indicators of a borrower are analyzed. The second stage analyzes the level of administrative management of the company. The third stage implies assessment of market positions, including analysis of the marginal revenue. The credit scoring studies also the level of a company's dependence on the project a borrower takes the loan for, said T. Yesayan, representative of the ARARATBANK Corporate Banking Department.
A borrower needs at least 50 points on the basis of the scoring system to get in the risk zone acceptable to the bank. Borrowers getting 85-100 points occur in the low risk zone. Afterwards, the bank makes a detailed assessment of pledge security.
The final assessment implies unification of pledge security and credit scoring results. In fact, a borrower gets a certain score displayed in a percentage indicator. T. Yesayan explained that this indicator allows the bank to minimize risks and is added to the basic interest of the bank.
Analysis of potential business borrowers is not limited with the above methods. A detailed analysis implies also probability of a default situation, the management system quality, various scenarios and factors (internal and external) that may affect the solvency of a borrower as well as potential possibilities to minimize risks and negative consequences.
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