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Paper info: Relationship risk score for relationship borrowers: Case of Karafarin Bank

Title


Relationship risk score for relationship borrowers: Case of Karafarin Bank

Authors


Dr.Amir Albadvi and Roudabeh Gharaee

Place of Publication


The paper was published at the 24th IMP-conference in Uppsala, Sweden in 2008.

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Abstract


The purpose of this paper is to estimate the risk of relationship in relationship lending in banking sector. This research extracts the most influential factors that would impact the default of a business relationship borrower. Solicitation of the factors is done through Delphimethodology. The mean weight of each factor is then calculated from grades given to each factor by the experts. As a case study, lending relationships of a private bank, Karafarin Bank (KB), and twenty four of its relationship borrowers (some being creditworthy clients and some having past dues), are examined and the credit committee of the bank is asked to rate these companies according to extracted attributes found by this research through Delphi method. The relationship risk score of these companies are then derived and analyzed. The analysis of the firms' risk scores reveals useful managerial implications on how to better manage B2B relationships by distinguishing low risk and high risk borrowers.