Risks faced by the banking sector, credit risk measurement methods and an application on Azerbaijan banking sector

Abstract

The most important type of risk that banks traditionally face is credit risk. The banking sector is basically faced with credit, operational, liquidity, interest rate, market, capital, exchange rate and operational risks. Among these risks, especially in recent years, the credit risk, which has started to be examined in more detail following the economic and financial crises in the world markets, and manifests itself more with the increase in the default risk levels of companies. The purpose of the thesis is to reveal what kind of credit risks banks face, what kind of practices they have developed to measure, manage and reduce this risk, what kind of regulations the supervisory authorities make and the credit risk outlook of the Azerbaijani banking sector.