Analysis of the client's financial condition. Financial monitoring of a client’s position in a commercial bank Research of receivables

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05.11.2022

Banks, loans, deposits

To assess the financial condition of the borrower (individual), banks determine a list of indicators and standard values ​​depending on the terms and volumes of lending, type of collateral, type of loan - for the purchase of a vehicle, construction or purchase of housing, etc.

Determined based on the results of an analysis of its qualitative characteristics (personal creditworthiness) and quantitative indicators (economic creditworthiness), confirmed by relevant calculations and documents.

When the bank considers the issue of granting a loan and subsequently in the process of debt servicing, the lender must analyze those indicators that may affect the borrower’s fulfillment of its obligations. It is also necessary to determine the level of possible influence of these indicators on the client’s creditworthiness, setting the corresponding significance scores and standard values ​​for each indicator.

Qualitative characteristics of the borrower:

  • Social stability – business reputation, marital status, permanent job;
  • General financial condition – availability of real estate, bank deposits, securities, vehicles, etc.;
  • Credit history – use of other bank services, intensity of use of loans in the past, timeliness of their repayment;
  • Health status and age of the client.

Main quantitative indicators:

  • Savings in bank accounts - this information is provided only at the request of the client;
  • Total net income and future forecast;
  • Collateral (availability of insurance policies, pledge of real and movable property, the possibility of transferring ownership of the loaned object) and the level of liquidity of the collateral.
  • Coefficients characterizing the client’s current solvency, his financial ability to fulfill loan obligations - the ratio of net monthly profit and monthly loan fees/interest on them, as well as the ratio of total expenses and income.

In progress analysis of the borrower's financial situation(individual), the indicators that are established to analyze the activities of enterprises (legal entities) are also taken into account:

  1. Market factors - the attractiveness of the services or goods offered, the type of area, market size and level of competition, the duration of the borrower’s activity in the market;
  2. Management – ​​business reputation, level of management, connections in the business world, ability and willingness to be responsible for fulfilling loan obligations;
  3. Forecasting the movement of money flows - the ratio of the loan amount and equity capital, the loan amount and the monthly cash turnover.

Banks must formalize the procedure for assessing the financial condition of clients and develop their own criteria for analysis methods. One of the approaches to analyzing the creditworthiness of borrowers (individuals) is a credit scoring system based on a score of risk factors. Credit scoring, in turn, is a variation of a more general method of assessing the position (creditworthiness) of a borrower - rating systems.

At the next stage, aggregation is carried out, each client’s belonging to one of 5 classes, designated A, B, C, D and D, is determined. In the process of identifying the class of a potential borrower, the bank takes into account its current financial condition and evaluates prospects. In addition to the financial situation of the borrower, two more parameters are assessed - the level and quality of collateral for the credit operation, as well as the client’s status of servicing the debt on the loan (principal amount and interest).

For analysis of the borrower's financial situation The bank uses various sources of information:

  • Data received directly from the client. These include: financial statements; documentation confirming the legal and legal status of the client; documentation related to the event being financed (business plan, feasibility study, copies of agreements and contracts for the implementation of this event, etc.); information received during a previous conversation with a potential borrower, as well as additional information (submitted at the request of the lender) - statements from accounts in other banks, certificates of collateral rights, certificates from the tax office, etc.
  • Intrabank information;
  • Information from external sources.

Financial condition monitoring is the process of constantly monitoring the effectiveness of the current financial activities of an enterprise in order to detect undesirable deviations in financial activities and eliminate them. Financial condition monitoring includes:

  • analysis and control over the implementation of current activities;
  • identification of objects of observation;
  • development of operational financial reporting systems;
  • determining deadlines for submitting relevant reports;
  • development, refinement and adjustment of assessment indicators;
  • studying the causes of deviations;
  • assessment of the adequacy of the system of normative and planned indicators.

Monitoring of the financial condition of the enterprise is carried out in the FinEkAnalysis program in blocks:

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Credit monitoring(credit monitoring) – a system of monitoring the condition of a credit organization, including analysis, assessment and forecast of fulfillment of loan terms stipulated by agreements.

Purpose of credit monitoring– ensure repayment of the principal debt on time and payment of interest on the loan.

Main directions of credit monitoring:

  • current borrower in statics and dynamics;
  • timely and complete fulfillment of his obligations arising from the terms of the loan agreement;
  • credit quality;
  • dimensions and correctness of formation;
  • correlation of the terms of the loan agreement with current market trends;
  • the correctness of the lender's reflection of movements related to the fulfillment of the terms of the loan agreement.

To check the borrower and early diagnose credit risk, mathematical and statistical methods are used. Credit monitoring is carried out in full or in part by service employees or other specialists in accordance with the order of the credit institution.

There are various options for organizing the credit monitoring process, but, as a rule, they are based on the following four basic principles:

  1. Carrying out periodic inspections of all types of loans by creditor banks. For example, all large loans are checked every 30, 60 or 90 days at the discretion of the bank, and other (smaller) loans are checked on a random basis.
  2. Carrying out a detailed development of the stages and sequence of credit control in order to ensure proper verification of all the most important conditions for each loan, including the following:
    • compliance in accordance with the concluded agreement;
    • liquidity (quality and condition) of property pledged to secure the loan;
    • availability of completeness and accuracy of all necessary documentation in case of litigation;
    • study and real assessment of the borrower's financial situation and forecasts of his needs to increase or maintain the size;
    • establishing the degree of compliance of the issued loan with the current standards for the formation of a loan portfolio and the use of resources.
  3. Giving increased attention to the frequency and depth of comprehensive reviews of problem loans, taking into account the growing or weakening trend of the problem associated with each specific loan.
  4. Increasing the number and deepening the content of inspections in conditions, as well as in cases where significant problems arise in the industries in which the bank’s credit resources are invested. These problems may include such as noticeable changes in tax, export-import legislation; changes in technology or the emergence of new competitors, etc.

Credit monitoring can be classified according to certain criteria:

  1. by area of ​​implementation:
    • internal credit monitoring, in which control is carried out primarily based on documents that correspond to one or another stage of the lending process, and the degree of credit risk is assessed;
    • external credit monitoring, which includes meetings and negotiations with borrowers who have fallen behind on payments; telephone calls, correspondence; counter checks of the movement of goods purchased using credit funds; on-site inspections; negotiations with guarantors, etc.
  2. according to the nature of the event:
    • preliminary credit monitoring, which involves checking the compliance of credit activities with legal requirements, the availability of appropriate permits, licenses, limits, etc. to the provision of loan funds to borrowers and includes analysis of loan documentation, assessment of the financial condition of the borrower and analysis of the loan project, assessment of the collateral for the loan, etc. The main goal of preliminary credit monitoring is to determine the real risk for the bank and make an effective decision on providing a loan to the borrower;
    • Current credit monitoring consists of the bank monitoring the fulfillment of the terms of the loan agreement by the borrower after making a decision to grant a loan and issue credit resources. The main purpose of current credit monitoring is to determine the risk of loss for a banking institution due to the borrower’s inability to repay the debt and pay interest on it. At the same time, the borrower’s timely repayment of credit debt is checked, changes in his financial condition and economic activities are determined, the client’s compliance with the terms of the loan agreement for the intended use of loan funds is analyzed, the quality of the property provided as collateral is assessed, etc.;
    • Subsequent (further) monitoring of the bank’s credit activities consists of ensuring a systematic check of the state of the organization of the bank’s credit activities, the correctness of registration, proper execution and conduct of credit operations. In the process of such control, it is necessary to find out the reasons for violation of the rules for conducting credit activities and take appropriate measures to eliminate them;
  3. depending on implementation methods:
    • remote credit monitoring;
    • inspection credit monitoring;
  4. depending on the scale of credit monitoring:
    • local;
    • regional;
    • National;
    • global;
  5. depending on the coverage area:
    • at the level of the loan portfolio as a whole - the main purpose of such monitoring is the timely identification of signs, facts, changes or their trends characterizing the state of the loan portfolio, which can lead or have already led to an increase in risks and can negatively affect the bank’s performance, as well as the development of proposals to improve the state of banking lending activities;
    • at the level of an individual loan agreement - the goal is to timely identify deviations in the process of lending to a specific borrower at all its stages; identifying the reasons for these deviations and developing proposals for correcting mistakes;
  6. Depending on the groups of borrowers, monitoring of loans provided is distinguished:
    • borrowers-legal entities;
    • borrowers-individuals;
    • borrowers-banks;
    • borrowers from non-bank financial institutions;
    • groups of related persons of the bank;
    • government borrowers.

Posted on the website 10/14/2009

In conditions of macroeconomic instability and an increase in defaults on loans from corporate borrowers, the importance of operational control over their financial and economic activities by credit institutions increases. This control, implemented in the form of an in-depth monitoring system of financial condition, will help to immediately respond to negative trends in the financial and economic activities of borrowers.

The current macroeconomic situation in the Russian Federation gives rise to a large number of risks that manifest themselves both in the financial sphere and in the sphere of real production. It should be noted that the current economic situation has revealed all the problems of corporate governance, not only among borrowing enterprises, but also among credit institutions themselves. According to some experts, the share of problem loans in the loan portfolio of some large banks is currently approaching 10-15%.

Since September-October 2008, almost all banks have tightened the requirements for new borrowers in terms of collateral and creditworthiness. They revised the parameters of the financial and economic activities of new borrowers, which suited the lenders. Banks began to pay more attention to the activities of existing borrowers.

What is in-depth monitoring and why is it needed?

In-depth monitoring carried out in an unstable economic situation in order to respond more quickly if the borrower has problems.

In-depth monitoring differs from regular monitoring:

Frequency of conduct;

Large volume of information considered;

Complex character.

Monitoring— periodic assessment of the borrower’s financial condition based on financial statements in order to determine the likelihood of loan repayment and the estimated reserve for possible loan losses.

According to the Regulation of the Central Bank of the Russian Federation dated March 26, 2004 No. 254-P “On the procedure for the formation by credit institutions of reserves for possible losses on loans, loan and equivalent debt” (hereinafter referred to as Regulation No. 254-P) assessment of credit risk for each loan issued ( professional judgment) must be carried out by the credit institution on an ongoing basis.

The credit organization, in the manner established by the authorized body (authorized bodies) of the credit organization, documents and includes in the borrower’s dossier information about the borrower, including the credit organization’s professional judgment on the level of credit risk for the loan, information about the analysis, based on the results of which the professional judgment was made , conclusion on the results of assessing the financial position of the borrower, calculation of the reserve.

The specified documents are drawn up:

For loans provided to individuals - at least once a quarter as of the reporting date;

For legal entities that are not credit institutions - at least once a quarter as of the date following the reporting date;

For loans provided to credit institutions - at least once a month as of the reporting date.

Factors determining the implementation in-depth monitoring:

The need to understand the real state of affairs of specific borrowers and the industry as a whole;

Increase in non-payments;

An atmosphere of general mistrust in the corporate and financial sectors;

An increase in the number of defaults on corporate bonds;

Decline in production in the main sectors of the economy;

Refusal of most banks to provide loans, even with open limits;

Requirements of Regulation No. 254-P, Regulations of the Central Bank of the Russian Federation dated March 20, 2006 No. 283-P “On the procedure for the formation of reserves for possible losses by credit institutions,” as well as the need to determine the reserve for possible losses on loans, including for the purposes of generating bank reporting on IFRS.

As can be seen from the figure, the two types of monitoring complement each other, since monthly monitoring is not carried out on the dates of quarterly monitoring.

Table 1. Differences in the content of quarterly and monthly monitoring

Types of operations carried out as part of monitoring Quarterly monitoring Monthly monitoring
Vertical and horizontal analysis of the balance sheet and income statement + -
Analysis
Liquidity + -
Financial stability + -
Business activity + -
Profitability + -
Revenue research + +
Research of receivables and payables + +
Analysis of reserves, financial investments, loans and credits + +
Analysis of bank turnover, borrower’s cash flow plan, order portfolio, contracts + +
Analysis of the influence of market and non-market factors + +

Industries most affected by the crisis

In our opinion, factors that contribute to classifying the industry in which the borrower operates as problematic may be the following:

Significant drop in demand for products;

The industry's main product is not an essential product;

Significant production costs;

The industry is significantly dependent on government orders;

The industry's products are exclusive and aimed at a specific group of buyers.

Based on these factors, the problem sectors include:

Wholesale trade;

Trade in luxury goods;

Car trade;

Construction;

Metallurgy.

It should be noted that enterprises operating in these industries do not necessarily experience serious financial difficulties, but it is necessary to pay special attention to market factors when analyzing their financial activities.

Documents required for monitoring the status of borrowers

Based on the type of monitoring, documents requested from borrowers can also be divided into two groups: documents requested quarterly and documents requested monthly. The grouping of documents is shown in Table 2.

Table 2. Documents requested as part of financial monitoring

Title of the document Quarterly monitoring Monthly monitoring
1. Balance + -
2. Profit and loss statement + -
3. Form 3, 4, 5 + (annual reporting) -
4. Transcripts for reporting + -
— fixed assets + -
- Construction in progress + -
- long-term and short-term financial investments + -
- reserves + -
- accounts receivable + -
- long-term and short-term loans and borrowings + -
- accounts payable + -
— cost + -
— commercial expenses + -
— administrative expenses + -
— operating income + -
- operating expenses + -
5. Certificates from banks about turnover, card files, loans + +
6. Certificate from the Federal Tax Service regarding debts on taxes and fees + +
7. Questionnaire with basic information about the borrower + +
8. Balance sheets for accounting accounts + +
— accounts receivable, inc. 62, 76 - +
— accounts payable, inc. 60, 76 - +
— sales revenue, inc. 90 - +
— reserves, accounts 10, 20, 41, 43, etc. - +
— financial investments, accounts. 58 - +
- loans and credits, account. 66 and 67 - +
— analysis of count. 51 and 52 monthly + +
9. Cash flow plan + +
10. Tax returns (VAT, income tax) + +
11. Order portfolio + +
12. Copies of main contracts + +

Quarterly monitoring based on financial statements

The analysis algorithm based on financial statements can be presented as follows:

Vertical and horizontal analysis of the balance sheet and profit and loss account;

Research of accounts receivable and payable, inventories, financial investments, loans and credits;

Research of liquidity and solvency;

Financial stability analysis;

Analysis of business activity;

Cost-benefit analysis;

Analysis of market and non-market factors.

Typically, credit institutions assess the financial condition of a borrower based on their own methodology, which most often involves calculating a rating based on a number of financial indicators. Let us dwell on the most important components of monitoring in the current conditions.

ACCOUNTS RECEIVABLE RESEARCH

As part of the monitoring, a decryption of accounts receivable is requested (lines 240, 241, 246, etc. of the balance sheet). In general, at least 80% of all receivables must be deciphered, indicating counterparties, as well as all debtors whose debt is at least 5% of all receivables.

Debt analysis examines:

Dynamics of accounts receivable and comparison with the dynamics of revenue;

The presence and dynamics of overdue receivables (determined based on the borrower’s data, as well as on the basis of the dynamics of reserves for doubtful debts, account 63);

Structure of receivables (dependence on large buyers, customers, identification of companies affiliated with the borrower);

Determination of the main forms of settlements with customers and their changes.

RESERVES STUDY

Inventories can be classified:

For raw materials and supplies;

Costs in work in progress;

Finished products;

Goods shipped;

Future expenses.

During reserve analysis, the following is examined:

Inventory structure;

Inventory dynamics.

In addition, it is necessary to compare the dynamics of work in progress and finished products with the dynamics of revenue, receivables and payables.

RESEARCH OF LONG-TERM AND SHORT-TERM FINANCIAL INVESTMENTS

As part of monitoring, they usually request a detailed breakdown of long-term and short-term financial investments on pages 140 and 250 of the balance sheet, indicating the names of specific investments. During the analysis of financial investments, the following are examined:

Dynamics of financial investments;

Structure of financial investments;

Purposes of financial investments;

Sources of investment financing;

Liquidity of financial investments and the possibility of their quick implementation.

RESEARCH OF MARKET AND NON-MARKET FACTORS

The relationship between market and non-market factors is shown in Table 3.

Table 3. Market and non-market factors

No. Name of the evaluation criterion Factors assessed
1 Changes in the borrower's core business

1. A change in the degree of legal and financial independence of the company (entry into groups of companies and holdings or separation from them), which led to a violation of existing economic ties.

2. Loss of economic ties with the main suppliers of raw materials (goods) or buyers, a sharp increase in prices for consumed materials (purchased goods).

3. Change (tightening) of the terms of settlements with suppliers.

4. Changes in the structure of sales revenue through the use of “non-monetary” forms of payment (bills of exchange, offsets and others).
2 Assessment of changes in the influence of market factors, including industry risks

1. Narrowing of the market due to a decrease in demand for the products produced by the enterprise (goods sold, services provided) or large companies entering the market offering dumping conditions.

2. A change in the profile of the company’s core activity due to negative changes for it in the market for its products (goods sold, services provided, work performed).

3. Narrowing of the product range as a result of negative market trends.

4. Decrease in the share of manufactured products (sold goods, services provided) in the total volume of the market (market segment) due to deterioration of the competitive position.

5. Changes in production/sales volumes under the influence of seasonality.

6. Other factors identified during the monitoring process
3 Assessment of changes in the influence of non-market factors

The following are the main non-market factors:

1) initiation of judicial or administrative proceedings against the borrower and/or the persons who provided security for the transaction, the consequence of which may be the alienation of a significant part of the property or the reduction/suspension of the main activity of the borrower (the persons who provided security for the transaction);

2) seizure of property and/or accounts of the borrower or persons who provided security for the transaction, encumbrance of their property, not agreed with the bank;

3) the presence of overdue obligations for payments to the budget and extra-budgetary funds, as well as for the payment of wages to employees of the enterprise, or a violation of the terms of debt restructuring to the budget and extra-budgetary funds (tax credit);

4) other negative factors identified during the monitoring process
4 Assessing changes in the structure and quality of management

1. The emergence of negative changes in the business reputation of business owners and/or its main managers.

2. The presence of conflicts between business owners and/or its main managers.

3. Changes in the composition of business owners, the withdrawal of large foreign and domestic companies, banks and financial groups from their membership, resulting in changes in the main type of activity, conditions for the supply/sale of raw materials, goods, works (services).

4. Change of key managers, resulting in a deterioration in the results of the company’s core activities.

5. Other factors identified during the monitoring process
5 Assessing changes in credit history

1. Obtaining information about non-fulfillment/improper fulfillment of obligations on credit products provided by other servicing banks (loans provided by other creditors).

2. Availability of information on the repayment of debt to other banks by providing the property of the borrower or persons who provided security for the transaction as compensation.

3. Other factors identified during the monitoring process
6 Assessment of changes in financial condition

Monitoring of financial condition is carried out in accordance with the requirements of this document. When conducting monitoring, special attention is paid to the following factors:

1) an emerging trend of deterioration in financial condition, expressed in a decrease in indicators of solvency, financial stability, net asset value, and the ratio of borrowed and equity funds;

2) the presence of a trend towards a decrease in business activity, including a decrease in sales volumes and account turnover, not related to the influence of seasonality;

3) an increase in the average turnover time of total assets while accelerating the turnover of accounts payable;

4) a decrease in the enterprise’s profitability indicators, its sustainable unprofitable activities, not provided for by the feasibility study (business plan, financial plan) provided at the stage of consideration of the loan application;

5) an increase in the volume of off-balance sheet obligations (guarantees, pledges, bills of exchange issued to secure the obligations of third parties);

6) other factors identified during the monitoring process
7 Assessment of the safety of the provided collateral Identification of facts of decrease in value, loss, non-compliance with storage conditions, replacement of the provided collateral not agreed with the bank, expiration of the insurance contract and its non-renewal for a new term
8 Evaluation of the implementation of the feasibility study (business plan, financial plan) Identification of losses not provided for by the provided feasibility study (business plan, financial plan), non-compliance with planned production and/or sales volumes, increase in total liabilities, including attraction of unplanned sources of financing of core and/or investment activities, direction of financing for purposes not provided for Feasibility study for the transaction
9 Country risk assessment (used for enterprises carrying out export/import operations and other types of activities abroad) The solvency of the foreign counterparty and its impact on the possible deterioration of the financial condition of the enterprise is assessed by experts.

Monthly monitoring of financial condition

The analysis algorithm can be presented as follows:

Revenue research;

Research of receivables and payables, identification of problem debts;

Research of reserves, financial investments, loans and credits;

Analysis of bank turnover and the borrower’s cash flow plan;

Monitoring the condition of the collateral.

The following features of monthly monitoring can be noted:

In relation to receivables, payables, inventories, financial investments, loans and credits, the analysis is carried out similarly to quarterly monitoring, however, the basis for the analysis is not financial statements, but balance sheets for accounting accounts.

As part of the study of receivables and payables, balance sheets are requested for accounts 60, 62, 76 for a certain period, broken down by counterparty, or a breakdown of receivables or payables for a specific date, indicating overdue ones. The objectives of debt analysis are:

Comparing accounts receivable and payable with reporting data or data from the previous month and identifying trends;

Identification of changes in the structure of debt and the reasons for its change;

Identification of overdue debts (can be indirectly found by identifying debtors and creditors for whom the debt is growing or has not changed for a long time);

Identification of affiliated companies in the debt structure, determination of possible changes in the work scheme or forms of settlements with counterparties.

As part of the inventory study, balance sheets are requested for accounts 10, 20, 41, 43, etc.

The objectives of inventory analysis are:

Compare various inventory items with reported or previous month data and identify trends;

Identification of the structure of inventories and the reasons for its changes;

Comparison of inventory dynamics with the dynamics of accounts receivable and payable, as well as revenue;

Determination of possible overstocking and illiquid inventories.

As part of the revenue analysis, either a VAT declaration (reflecting quarterly revenue), or a balance sheet for account 90-1 for a certain period, as well as certificates of revenue in kind are requested. When analyzing revenue, the main attention is paid to:

The structure of revenue by type of product and its comparison with previous periods;

Revenue dynamics and comparison with previous periods.

In addition, when studying revenue, it is important to take into account seasonality, as well as the characteristics of the company’s production cycle.

It is very important to analyze bank turnover as part of monthly monitoring for the following reasons:

According to RAS, revenue is reflected by shipment, so analysis of turnover in banks makes it possible to assess cash flow;

Certificates from servicing banks should reflect information about the presence of a file cabinet of unpaid documents, which makes it possible to identify potential problems of the borrower;

Also, the certificates must contain information about loans issued by banks, which allows you to compare this information with accounting data and estimate the loan load.

Typically, as part of a study of turnover in banks, the following is requested:

Certificate from the Federal Tax Service regarding open bank accounts;

Certificates of turnover, card index and availability of loans, off-balance sheet obligations.

Registration of monitoring results. Dealing with problem debt

The monitoring results are presented in the form of an analytical note, which usually contains the following information:

Name of the borrower, type of loan product and transaction parameters;

Borrower's industry, brief analysis of market and non-market factors;

Conclusions based on the results of vertical and horizontal analysis of the balance sheet and income statement;

Conclusions based on the results of the analysis of liquidity, financial stability, business activity and profitability;

Analysis of sales revenue;

Analysis of receivables, payables, financial investments, inventories, loans and credits;

Analysis of turnover in banks;

Analysis of the borrower's order portfolio and cash flow plan;

Conclusions based on the results of collateral monitoring;

General conclusion about changes in risk for a specific transaction/borrower.

Factors that may indicate potential problems for the borrower:

A sharp decrease in revenue and receipts to current accounts;

Increase in inventory and work in progress;

Increase in accounts receivable, increase in overdue debt;

Increase in accounts payable, including overdue ones;

Loan portfolio growth;

Availability of card files for invoices;

Presentation of demands from tax authorities;

Submission of claims by third parties;

Fall in demand for products;

Presence of predicted cash gaps without additional financing, etc.

If a potentially problematic debt arises, you must:

Conduct negotiations with the borrower, guarantors, and pledgors for loans;

Understand the causes of potential problems;

Understand the need for loan restructuring;

Find a mutually acceptable restructuring solution.

Basic rules of conduct for creditors in the event of overdue debt:

Correctness;

Persistence;

Focus on finding a mutually acceptable solution;

Compliance with laws.

In conclusion, it should be noted that credit institutions need to restructure their work in relation to assessing the financial condition of existing borrowers by deepening and increasing the frequency of analysis. The proposed approaches to building an in-depth monitoring system will help not only to correctly assess the financial condition for reserving purposes, but also to immediately respond to the occurrence of financial difficulties among borrowers.

R.V. Ulyanov,"NOMOS-BANK" (OJSC), credit expert, Ph.D.

According to the recommendations of the Bank of Russia, commercial banks are required to develop their own methodology for assessing the financial position of large corporate borrowers(hereinafter referred to as the OFPP methodology), based on a system of indicators of the financial performance of borrowers, as well as indicators of business and industry risks.

Methods of various banks: characteristic features and features

The methodology for assessing the financial position of large corporate borrowers and the system of financial indicators described in it, as well as the point system for each group of coefficients for business risks (business and industry risks) must comply with the requirements and recommendations of the Bank of Russia, be documented in a separate regulation and approved by the bank’s board. In some cases, for example, if a Russian bank is part of an international financial group (the parent organization is located in another country), in addition to the requirements of the Bank of Russia, the FPP methodology must satisfy the criteria and requirements of the parent company.

The Bank of Russia recommends that banks annually adjust the approaches set out in the FPP methodology, as well as the set of coefficients for assessing the performance of enterprises, taking into account the current economic situation, going beyond the scope of “classical” financial analysis. It is worth paying special attention to qualitative parameters, that is, the characteristics of the industry in which the borrower operates, focusing on business reputation, positive qualifications of managers, and the dynamics of the profitability of the enterprise, including in conditions of fierce competition and aggressive government policies in recent years. It is also necessary to develop methods for determining the reliability and reality of the financial statements of a potential borrower, which will help to promptly identify symptoms of financial danger.

Each bank uses its own methods and means of analyzing the creditworthiness of large corporate borrowers. The reasons for this diversity may be different degrees of confidence in quantitative and qualitative methods for assessing creditworthiness factors, historically established individual principles, lending culture and practice of creditworthiness assessment, and the use of a certain set of tools for minimizing credit risk.

To assess the financial condition and creditworthiness of a large corporate borrower - a legal entity (except for credit institutions), one should take into account objective indicators of its activities:

  • volume of product sales;
  • profit and loss;
  • profitability;
  • liquidity and turnover ratios;
  • cash flows (receipt of funds into the borrower's accounts) to ensure repayment of the loan and payment of interest on it;
  • composition and dynamics of receivables and payables;
  • availability of reliable sources of loan repayment;
  • relationships with counterparties;
  • dependence on suppliers and buyers;
  • other parameters characterizing the financial and economic activities of the enterprise.

In addition, banks must take into account the business risks of the borrower (business and industry risks). Indicators for assessing such risks are often subjective in nature (in international banks these criteria are included in a separate block and analyzed more carefully):

  • efficiency of enterprise management (participation of shareholders in management);
  • the market position of the borrower and its dependence on cyclical and structural changes in the economy and industry;
  • the presence of government orders and government support for the borrower in a particular region or industry (for example, reimbursement to alcohol production enterprises of part of the excise taxes paid from the federal budget of the region);
  • the borrower's history of repayment of credit debt in the past;
  • the possibility of introducing restrictions on the production and (or) supply of products (or raw materials for their production), including export/import;
  • the level of competition in the industry characteristic of the region;
  • international risks (sales and supply of products, political instability in the country of the manufacturer/buyer), etc.

All OFP techniques have their similarities and differences. Each technique has its own advantages and disadvantages. We will conduct a comparative analysis of methods for assessing the financial position of large corporate borrowers.

Comparison of methods for assessing the financial position of large corporate borrowers of various banks

Bank No. 1 (Russian subsidiary of one of the international banks)

To determine the credit risk limit, a quantitative and qualitative assessment of two groups of risk factors is carried out, assigning a score to each:

1. disclosure of client risks, their characteristics:

  • risks for business owners;
  • client group risk;
  • risks of company management;
  • industry risks;
  • financial risks;
  • relations with banks;
  • risks associated with the business plan, client limit;

2. disclosure and qualification of transaction risk. The financial condition of the borrower is assessed based on four groups of ratios: profitability, liquidity, turnover and financial stability.

The assessment of the results of coefficient calculations is that after calculating the indicators, depending on the industry, the sum of points is calculated taking into account the weight of the indicator.

After this, the final score of the analysis of financial reporting indicators and the financial position are determined: good/average/bad (according to Bank of Russia Regulations No. 254-P dated March 26, 2004, No. 283-P dated March 20, 2006)

Advantages. Simplicity and transparency of assessment. Accounting for quantitative and qualitative indicators of the borrower’s creditworthiness. For each group of factors, the analyst indicates not only scores, but also positive and negative factors. Analysts are not limited to accounting and reporting data. The credit history and business reputation of the borrower are taken into account. The effectiveness of management is taken into account, including the level of senior managers. The borrower’s position in the industry and region and the level of penetration of modern technologies are taken into account. Flaws. A large volume of assessed indicators (two groups, each of which is divided into indicators). Need for Industry Risk Assessment: The analyst must be knowledgeable about all the industries in which the borrowers operate. Short assessment time (no more than two days). Writing a conclusion in English.

Bank No. 2 (included in the top 4 large Russian banks)

To determine the credit risk limit, a quantitative and qualitative assessment of five risk groups is carried out:

  1. risks associated with the share capital structure and internal structure of the corporate client;
  2. risks associated with the credit history and business reputation of the borrower;
  3. risks associated with management effectiveness;
  4. risks associated with the borrower's position in the industry and region, production equipment and the level of penetration of modern technologies;
  5. risks associated with the financial condition of the borrower.

The financial condition of the borrower is assessed based on three groups of indicators. Evaluation of the results of coefficient calculations consists of assigning a category for each of these indicators based on comparison of the obtained values ​​with established sufficient values. After this, the sum of points is calculated taking into account the weight of the indicator, the borrower’s creditworthiness class is determined and a conclusion is made about the possibility of issuing a loan

Advantages. Simplicity and transparency of assessment. Accounting for quantitative and qualitative indicators of the borrower’s creditworthiness. The information used by analysts is not limited to accounting and reporting data. The share capital structure and internal structure of the corporate client are taken into account. The credit history and business reputation of the borrower are taken into account. The effectiveness of management is taken into account, including the level of senior managers. The borrower’s position in the industry and region and the level of penetration of modern technologies are taken into account. Each of the ratios used to assess financial condition has a reference value with which its calculated counterpart is compared. When the overdue debt is fully repaid, the creditworthiness class is restored. Flaws. The rating assessment does not allow taking into account all the key characteristics of the client. The reference value of the coefficients is not differentiated for individual industries that have different structures of assets and liabilities. The reference value of the coefficients is not differentiated by territory. Weighting coefficients are subjective, while minor shifts in the system of these coefficients can fundamentally change the final result and transfer the borrower from one class to another. The indicators used in the analysis of creditworthiness are calculated based on reporting data, which do not allow assessing the borrower's creditworthiness in the future. When determining the class of the borrower, information on expected cash flows and financial results is not taken into account. Any errors and inaccuracies in determining the critical value of the sum of points can give a fundamentally incorrect result.

Bank No. 3 (one of the Russian agricultural banks)

Financial position is the most important characteristic of the reliability of a legal entity. Analysis of the financial situation includes the following steps:

  1. analysis of the composition, structure and quality of the balance sheet;
  2. analysis of performance results;
  3. calculation of liquidity, solvency and turnover indicators, other quality indicators;
  4. conclusions about the financial position based on the results of the analysis;
  5. forecast of development prospects.

When determining the financial position of a legal entity, the calculated indicators are compared with industry averages and analyzed over time.

Based on the results of the review, a conclusion is drawn indicating the criteria on the basis of which the financial situation of the borrower is assessed as good, average or bad.

Advantages. Simplicity and transparency of assessment. Accounting for quantitative and qualitative indicators of the borrower’s creditworthiness. Availability of specially developed formulas to determine the financial situation of the borrower. The presence of corrective factors taken into account when assessing the financial condition of a legal entity. Use of reference values ​​of financial ratios differentiated by industry. Taking into account changes in indicators over time and then making a forecast. A long analyzed period, which allows you to build an accurate forecast of the borrower’s long-term creditworthiness. Flaws. Lack of formal assessment of non-financial parameters. Non-financial indicators are taken into account additionally and do not make a significant contribution to the assessment results. Any errors and inaccuracies in determining the critical value of the sum of points can give a fundamentally incorrect result. The reference values ​​of the coefficients are not differentiated by territorial basis.

Note that everything Methods for assessing the financial position of large corporate borrowers have common shortcomings:

  1. incomplete methodological basis for assessing non-financial parameters of the borrower (lack of unified databases with accessible information about the client, such as tax payments, loan turnover in other banks, availability of card files, etc.). This is the main drawback inherent in all of these methods;
  2. opacity of doing business (when assessing the financial condition of an enterprise, it is necessary to use a combined analysis of management and financial statements, since the latter does not allow external users to see the real picture of the business in question, and therefore understand the actual risks of lending to the enterprise).

Another drawback, inherent not only to the presented methods, but to all Russian methods, is associated with the peculiarities of doing business in Russia, in particular, the weak transparency of the financial and economic activities of enterprises. Thus, any method for assessing the creditworthiness of a legal entity is highly sensitive to distortion (unreliability) of source data, especially financial statements.

The above FPP methods show that one of the main areas of analysis of the borrower’s condition when assessing his creditworthiness is financial analysis. Various aspects of financial analysis as a specific system are reflected in all presented methods for assessing the quality of potential borrowers used by banks. Analysis of the borrower's financial condition is the most significant characteristic of his creditworthiness. And each commercial bank sets a specific set of financial indicators and their standard values ​​independently, since today there are no regulatory documents regulating this area.

Symptoms of possible financial danger for a bank

In practice, in order to correctly assess the client’s financial situation and make timely conclusions about his creditworthiness and the feasibility of concluding a transaction, an enlarged scheme for analyzing the risk profile of a transaction in the corporate lending segment, divided into financial blocks, is used (Figure 1).

Picture 1. Scheme for analyzing the risk profile of a transaction in the corporate lending segment

Thus, risk analysts of a bank (whether it is a large Russian bank, an international bank or a regional branch) must formulate for each credit transaction a clear description and justification of the purpose of financing, the structure of the transaction, its risk profile (a transaction with a high risk, moderate risk or risk-free transaction), as well as assess the risks when analyzing the client’s financial situation.

When financing working capital, it is necessary to analyze the company's operating cycle, the reasons and timing of the working capital deficit, the timing and sources of replenishment of working capital. The structure of the transaction must correspond to the operating cycle (selection in the “low” season, repayment in the “high” season, etc.), that is, it must be explained why the borrower is offered this particular transaction structure.

A brief description of the cash flow model should include:

  • the main assumptions on the basis of which the forecast for the flow of funds from operating activities was made (revenue remains at the same level/increases for one reason or another; the same with expenses);
  • data on loan repayment (conclusion about refinancing risk);
  • stress testing results;
  • sensitivity analysis;
  • conclusions.

Next, it is necessary to analyze the sources of loan repayment: what the receipt of funds depends on, what are the possible negative factors, whether the bank (and why) satisfies the primary source of repayment. The presence of collateral can be considered as an additional comfort factor (but not as a basis for making a decision).

After this, the financial analyst provides in his conclusion a description of the business model of the borrower/group: products produced/sold, features of the production cycle, seasonality, conditions under which sales are made, specifics of settlements with counterparties, suppliers/clients (dependence), competitive advantages (reasons) and the purpose of purchases from this particular borrower, the possibility of reorientation to another manufacturer), pricing (what factors influence the price), business risks, interests of shareholders in this business, etc.

This also includes figures on the dynamics of production/sales with an explanation of the main factors determining this dynamics (how and due to what the borrower survived the crisis, what are its market positions and prospects). It would also be good to evaluate the effectiveness of the business model in comparison with similar enterprises. If there is a group, it is necessary to explain intra-group relationships, commodity and cash flows.

The “Financial Analysis” section should include a description of the causes and consequences of the dynamics and structure of the main indicators of the income statement and balance sheet, as well as an analysis of ratios. All indicators should be considered from the point of view of their impact on the company’s ability to fulfill loan obligations, that is, organically leading to the conclusion about the good/average/unsatisfactory financial condition of the borrower. Particular attention should be paid to the size of the debt, its structure by maturity, to assess the risk of refinancing and the position of the bank relative to other creditors.

The final section of the risk analyst’s conclusion should contain conclusions - an assessment of the total risk when lending to a client (strengths and weaknesses of the client’s activities, business transparency, credit history with banks, dependence of the borrower’s financial condition on the activities of related structures, lack of consolidated reporting for the group, etc.) .

In addition, an important and integral element of the analysis of the borrower’s financial situation is the timely identification of symptoms and signs of possible financial danger for the bank (in banking terminology this is called EWS - Early Warning Signals, or “early signals/signs of problems”) both at the stage of issuing a loan and and in the process of monitoring the loan until it is fully repaid. In banking practice, a separate large section in the OFPP methodology is devoted to the criteria for determining early symptoms/signs of problems, as well as their set (Table 1).

Table 1. Early signals and signs of problems in the methodology for assessing the financial position of large corporate borrowers of various banks

Signals of possible financial danger Signs of an impending financial crisis in the client’s activities
Financial signals
Lack of income from contracts with buyers/customers and, as a consequence, extension of terms for settlements with suppliers Systematic violation of the conditions for maintaining credit turnover in the bank, associated with the lack of receipts for work performed/services rendered/goods supplied from buyers or customers
Absence of newly concluded contracts for the provision of goods/performance of work/provision of services (winding down the business) Significantly exceeding the agreed credit limits at the bank(s)
The presence for several reporting periods in a row of negative values ​​in lines 2400 (“Net profit (loss) of the reporting period”) of form No. 2 and 1300 (total for sections “Capital” and “Reserves”) of form No. 1 of quarterly reporting in accordance with RAP
Exceeding the value of the total debt burden (Total Debt/EBITDA) according to the quarterly/annual official reporting of the borrower in accordance with RAP, set at 3.5 Opening by the borrower of current accounts in other credit institutions without notifying the creditor bank, transfer of all funds
Non-financial signals
Establishing the production of previously unproduced products and, in connection with this, developing a new sales market Inappropriate use of funds received from a loan
The emergence of client dependence on loans (usually short-term) due to increasing overhead costs Insignificant and irregular cash flows from the sale of goods, especially in combination with significant payments to suppliers and an unjustified increase in credit sales
The client’s omissions in control over his working capital (general excess inventory, overstocking, illiquid stock, etc.) Payments to other credit institutions or a sharp increase in the number of requests from them about the client’s financial condition
The client has large and unplanned losses Client manipulations with checks
Unexpected radical changes in company management or unfavorable industry trends Violation by the client of deadlines for preparing reports or submitting necessary financial documents to the bank (this is often associated with their falsification). Explanations from clients about the reasons for the delays are in themselves signs of a problematic loan
Client requests for additional funds to be allocated beyond previously agreed limits
Any unmotivated failure to comply with obligations

Banks are required to monitor changes in the shareholder structure of the borrower company, the state of its business as a result of financial/political instability in the country and economy in order to ensure the stability of its financial position and compliance with the terms of the loan agreement, as well as to search for new business opportunities cooperation with the client. Loan monitoring is necessary to promptly identify signs that the borrower may have difficulty repaying the loan (examples of early warning signs of problematic corporate clients are discussed in the figure below). This must be done at an early stage in order to maximize the effect of the bank’s corrective actions and reduce its losses.

Figure 2. Warning signals about problematic corporate clients

The human factor is one of the biggest obstacles to early identification of problem loans. Employees responsible for analyzing corporate borrowers often do not report warning signs due to their ignorance, heavy workload and short deadlines for assessing the financial situation of clients, as well as due to the lack of an automated system in Russian banks for detecting and preventing early signals/signs of problems (in This system is widely used in European banks).

Experience shows that problem loans, even after they have been identified, often turn out to be much worse than bank employees thought. But the situation can be even worse if the bank’s management, knowing about the problems of its loan portfolio, hides them and at the same time tries to compensate for losses by issuing risky loans and speculation. To avoid this, banks conduct periodic independent reviews by the internal audit service so that it identifies signs of problematic loans that were missed or hidden by employees. Inspections conducted by supervisory and regulatory authorities (Bank of Russia, external audit companies) also often identify undetected problem loans. In the process of effective credit risk management, the first person to identify problem loans is the bank's internal control service. The measures to be taken upon such detection are shown in the following figure.

Figure 3.

Monitoring loans is especially important not only at the stage of consideration of a credit transaction, but also at all stages of the credit process, especially at the stage of repayment of the loan or when it becomes overdue, or in case of violation of the conditions established by the loan agreement for the minimum amount of collateral or the value of financial ratios. In order to avoid violations of loan agreements, as well as to eliminate them in a timely manner, the bank is developing a methodology for assessing the financial position of large corporate borrowers, which not only provides for assessing the borrower’s creditworthiness as the main way to reduce credit risk, but also includes general principles. Using these principles, it is not difficult to promptly identify early signs of problems and try to eliminate or prevent loan delinquency or borrower default.

Based on the materials of the article: Finogeev D.G., Shcherbakov E.M. Assessing the creditworthiness of legal entities using the example of the largest banks of the Russian Federation // Modern problems of science and education. 2013. No. 6.