![]() When assessing the creditworthiness of the borrower, institutions should put emphasis on the borrower’s realistic and sustainable future income and future cash flow, and not on available Collateral. Institutions should consider that Cash Flow from the ordinary business activities of the borrower and, when applicable within the purpose of the loan agreement, any proceeds on the sale of the assets are the primary sources of repayment. covenants, and, if applicable, third-party guarantees and Collateral structure. when relevant, assess the structure of the transaction, including the risk of structural subordination and related terms, e.g.consider all the borrower’s financial commitments, such as drawn and undrawn committed facilities with institutions, including Working Capital facilities, credit exposures of the borrower and the past repayment behaviour of the borrower, as well as other obligations arising from tax or other public authorities or social security funds. ![]() determine and assess the borrower’s Credit Scoring or internal Credit Rating, where applicable, in accordance with the credit risk policies and procedures.analyse the Business Model and Business Strategy of the borrower, as set out below.analyse the financial condition and Credit Risk of the borrower, as set out below.When carrying out the creditworthiness assessment, institutions should: The selection of the suitable and adequate method should depend on the risk level, size and type of loan.Ĭomponents of Creditworthiness Assessemtn Institutions should carry out the Creditworthiness assessment in relation to the specificities of the loan, such as nature, maturity and interest rate.įor assessing the borrower’s ability to meet obligations under the loan agreement, institutions should adopt suitable methods and approaches, which may include models, as long as these guidelines are met. Institutions should also analyse the loan application of the Borrower in order to ensure that the application is in line with the institution’s Credit Risk Appetite, policies, credit-granting criteria, limits and relevant metrics, as well as any relevant macroprudential measures, where applied by the designated macroprudential authority. Institutions should assess the borrower’s current and future ability to meet the obligations under the loan agreement. General requirements for the analysis of SME Credit Risk are set in SME Credit Risk Analysis is the specialization of Credit Risk Analysis to the particular context of SME Lending. 6 Assessment of guarantees and collateral.5 Analysis of the borrower’s business model and strategy.4 Analysis of the borrower’s financial position.3 Components of Creditworthiness Assessemtn. ![]()
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