Credit risk

How it is used

The biggest risk for most banks. Credit risk teams assess, measure and manage it, looking at the probability of default, collateral and exposure. Reports often say credit risk has risen or fallen in a sector.

Example sentences

1. Credit risk in the construction sector has increased, so we are tightening our lending criteria.

2. The credit risk committee meets every Tuesday to review large loans.

Common collocations

• assess credit risk
• credit risk management
• credit risk model
• manage credit risk

Related terms

• defaultFailure to make loan or bond payments as agreed. A borrower is usually treated as in default after missing payments for a set period, often 90 days.
• exposureThe amount of money a bank could lose to a particular borrower, sector, country or market if things go wrong.
• collateralAn asset, such as property, cash or securities, that a borrower pledges to a lender and that the lender can sell if the loan is not repaid.
• non-performing loanA loan on which the borrower has stopped making payments, usually for 90 days or more, or which is unlikely to be repaid in full.
• credit scoreA number that shows how likely a person is to repay debts, calculated from their credit history, such as past loans, card use and late payments.

More terms: Risk Management

• liquidity
• hedge
• market risk
• operational risk
• provision
• stress test
• credit rating
• risk assessment
• mitigate
• risk appetite
• counterparty risk
• expected credit loss