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Optimization of Credit Activity of a Commercial Bank Based on a Parametric Model

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  • Mark Gorskiy
  • Andrey Rudakov
  • Alexander Yemelyanov

Abstract

In the past few decades, a line of research focusing on the financial portfolios of banking structures has been actively developed in the world’s economic science. The interest in deposit-and-loan portfolios is caused by the rapid growth of both the banking sector and the entire capital market in the world. This paper presents empirical research in the field of analysis of the credit and investment activities of a commercial bank with an extended set of criteria. The team of authors considered a certain approach to parametric modelling of the optimal banking portfolio taking into account unregulated exogenous (macroeconomic) and endogenous (set by the bank) parameters that affect its structure and composition. As part of the proposed method, a list of monitored parameters of the banking portfolio, which was developed due to financial stability and reliability indicators, was compiled. Accordingly, based on calculations with a modified parametric model and assessment of the level of their financial stability and reliability, shortcomings in the structure and composition of the portfolios of the banking organizations under research were identified with respect to the rationality of resource allocation and the adequacy of equity capital. Thus, it was concluded that taking into account the criteria for managing the banking portfolio, measures of profitability and risk, as well as the reliability of the financial and economic base and financial stability of the bank contributes to the growth of its rating and client base, which is especially important for universal commercial banks.

Suggested Citation

  • Mark Gorskiy & Andrey Rudakov & Alexander Yemelyanov, 2022. "Optimization of Credit Activity of a Commercial Bank Based on a Parametric Model," Academic Journal of Interdisciplinary Studies, Richtmann Publishing Ltd, vol. 11, January.
    • Handle: RePEc:bjz:ajisjr:2164
    DOI: https://doi.org/10.36941/ajis-2022-0003
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    References listed on IDEAS

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    1. Murphy, Neil B, 1972. "Cost of Banking Activities: Interactions between Risk and Operating Costs: Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 4(3), pages 614-615, August.
    2. Catarina Fernandes & Jorge Farinha & Francisco Vitorino Martins & Cesario Mateus, 2018. "Bank governance and performance: a survey of the literature," Journal of Banking Regulation, Palgrave Macmillan, vol. 19(3), pages 236-256, July.
    3. Korhonen, Antti, 1987. "A dynamic bank portfolio planning model with multiple scenarios, multiple goals and changing priorities," European Journal of Operational Research, Elsevier, vol. 30(1), pages 13-23, June.
    4. Shim, Jeungbo, 2019. "Loan portfolio diversification, market structure and bank stability," Journal of Banking & Finance, Elsevier, vol. 104(C), pages 103-115.
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