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.