ASSESSMENT OF CREDIT RISK MANAGEMENT PRACTICE IN COMMERCIAL BANK OF ETHIOPIA (CBE’S).

Abstract

Taking risks is an integral and unavoidable part of banking business, indeed, embedded with reward for taking it. Therefore, risk management is the major component of strategic management system. Banks like CBE’s which has an objective of benefiting the wider society rather then simply profit making, through active participation in financing economic development programs and long term project of the country, will inevitably require risk management strategy including credit risk management. This is because it is believed that there is a close relationship between company’s vision, mission, and general strategic direction on the one hand, and its willingness and ability to take risk ( risk appetite, risk tolerance),risk policy and risk strategy on the other hand. Therefore, the main purpose of this paper is to asses CBE’s credit risk management practice against NBE and Basel parameters of credit risk management principles. The study used exploratory research approach. The objective is to generate more information about the situation before launching a formal study and to define clearly the research question in the form of investigative questions. Structured set of interviews and questionnaires were used to collect the primary source of data from samples in order to attain research objectives. Simple analysis fact against these standards indicated that there are deviation on role and responsibilities of board of director with respect to credit risk management process, lack of accurate, reliable and consistent information/data base system, lack of variety of risk controlling techniques, and poor integration among departments are some of the challenges in credit risk management practice in CBE’s. The reason behind for simple descriptive analysis is so as to make simple and easy respondents feed back on credit risk management practice and put in a precise way the finding that were found from them.