Literature Review On Credit Risk Management In Banks

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As my aim is to provide a comprehensive and systematic review, the analysis encompasses published research papers from journals.

In summary, this study will contribute to banking literature, especially CRA research.

This led to an impediment of a precise academic debate in the field, thereby; hindering discovery of possible solutions for CRM.

Secondly, the extent of such conceptualisations fails to incorporate the current needs to accommodate the perspectives of a wide range of actors (e.g.

Similarly, the full information about the consequences, in this case, borrowers engaging in risky activities cannot be obtained.

Herne () finds some evidence showing that individual choices disappear when individuals have an opportunity to learn and correct their choices to be more in line with the standard utility model depending on the situation where decision making takes place, thereby concluding that different institutional structure affect such differing preferences.As this is a systematic review conducted according to the guidelines by Tranfield et al.(), the review follows a transparent and thorough process aimed at enhancing scientific rigor and at developing a reliable stock of knowledge.Moreover, rational decisions tend to be made based on unrealistic assumptions (Robbins and Coulter In CRA, it is not about solving a problem but contemplating whether to take an opportunity for return to realise in the future from investment.These opportunities come with uncertainties and it is impossible for banks to have complete information.Similarly, the studies also find that the standard utility model works well in certain types of competitive markets but not in other institutional environments.These are the results of individuals’ limited cognitive capabilities, information processing capacity, time and cost constraints on decision makers to obtain complete information.In addition, with the repeated banking crises over the years due to poor CRM by banks and other financial institutions, this area has received a lot of attention from academics and many research papers have been published in this area.However, the conceptions of risk by these researchers can differ significantly.In other words, optimal ‘risk perception’ is not attainable.Thus, the term ‘bounded rationality’ is created by Simon ( ‘The human being striving for rationality and restricted within the limits of his knowledge has developed some working procedures that partially overcome these difficulties.


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