The Evaluation Model of Borrower's Creditworthiness of Commercial Bank

This paper is aimed to the creation and testing of the evaluation model of the bank borrower’s creditworthiness. The results of creation the logit-regression of the borrower’s probability default, including the financial indicators of 159 companies, are presented in frame of an approach based on internal ratings. The results of testing this model on two construction companies, one of which is bankrupt, were included in the evaluation model of the bank borrower’s creditworthiness. This model includes not only the probability of the borrower’s default, but also the analyzed quality indicators of the borrower’s performance. Owing to creation the model of creditworthiness, we obtained the borrower rating, based on which, we made a conclusion about the appropriateness of lending. The work also includes the calculation of the credit risk components within the basic approach based on internal ratings. According to the results of the research it was proved that when we analyze the borrower's creditworthiness, it is necessary to take into account not only the financial indicators, but also other information about the borrower. Only after conducting a comprehensive analysis, we made a conclusion about the appropriateness of lending.