The Risk Assessment Process to Evaluate the Non Performing Loan of Real Estate Projects – in Thai Commercial Banks

Abstract

This study aims to examine the risk factors that affect the housing loan’s approval processes in Thailand’s financial institutions and overall real estate development industry. The respondents of this study were categorized into 3 groups as 1. Mortgage Sales (housing loan), 2. Retail Credit Analyst, and 3. Credit risk analyst. Those respondents were selected from 2 biggest banks, which have non performing loan_NPL the largest market shores in housing loan in the previous fiscal year (2013). The data collection tool used in the study was structured interview, with The 6 interviewees from the a fore mentioned banks, followed by the qualitative content analysis to analyse the interview records. The findings from this study are the followings : Firstly, the mortgage sales consider the characteristics of the borrower the most, then the capacity to repay loan (also the borrowers’ repayment records). Secondly, the retail credit analyst focused on the capacity to repay loan, followed by the borrowers’ capital. Lastty, the credit risk analyst mainly considered the borrowers’ characters, followed by the collateral (particularly land and buildings). In addition, the study found that the financial institutions typically considered 6C’s Credit criteria, where by are Character, is the key factor to consider followed by Capacity. However, the factors also depend on the consideration of the Retail Credit Analyst. Moreoner, the Financial Institutions also the risk assessment process to mitigate the risk on the borrowers, by considering Know Your Customer : KYC, and Customer Due Diligence : CDD. The results of is study can be applied to other banks in order to classify the housing loan borrowers. as well as improving the housing loan approval process.