Abstract:

Credit risk is an inherent part of banking operations, primarily associated with the potential for borrower default. The ability of banks to effectively mitigate credit risk is crucial not only for ensuring their financial stability but also for enhancing their profitability. This research explores the impact of various credit risk mitigation (CRM) techniques, such as collateralization, credit derivatives, and credit insurance, on the profitability of banks. Using data from a sample of commercial banks, this study assesses how these techniques influence profitability indicators, including Return on Assets (ROA) and Return on Equity (ROE). The findings suggest that effective CRM strategies are positively correlated with higher profitability, though the strength of this relationship varies based on the technique used and the specific market context.

Description:

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