Bank Credit Risk Management

Bank management, from a finance theory perspective, is generally acknowledged to involve the management of four major balance sheet risks: liquidity risk, interest rate risk, capital risk and credit risk (Hempel et al, 1989). Of these, credit risk has commonly been identified as the key risk in terms of its influence on bank performance (Sinkey, 1992, p.279) and bank failure (Spadaford, 1988).