Assessing the Level of Credit Risk of Mortgage Lending in Commercial Banks and Proposals for Its Reduction (by the Example of PJSC “VTB24”)

The observed decline in the Russian economy leads to an increase in debt defaults. This process demonstrates the need for studying credit risk and searching opportunities to reduce it. In this context studying the credit risk of mortgage lending is of great interest since the popularity of mortgage loans as a long-term bank asset has recently increased. An assessment of credit risk of a mortgage portfolio with the use of coefficient method is given in the article. The analysis allowed to consider the dynamics of the level of credit risk and identified existing possibility of additional risk reduction of mortgage lending operations by means of changing the structure of deducted reserves. The author proposes a new structure of categories of loan quality, which involves changing the quality and quantity of credit exposures from five to eight. This allows to form the reserves more evenly and to predict their gradual increase in proportion to real borrowers’ state in the context of changing the status of loan quality.The author notes that while maintaining the level of risk, this model of changing the structure of reserves gives an opportunity to release funds from reserves and to use them in the active operations of the bank, making a profit from their “work”, which can be used for covering losses from realization of credit risk and replenishment of these reserves.