How Credit Risk Management in Australia Can Affect Financial Institutions Growth: A Study

Abstract

Ineffective credit risk management methods were largely responsible for the collapse, as well as financial problems, of many financial institutions. This particular research is designed to evaluate how insufficient credit risk management brought about the banking crisis of Australia in 2003/2004 determine other contributing factors. It found that inability to effectively manage credit risk was the most important element in the crisis, leading to ineffective management, insufficient risk control, poorly designed strategies for business expanding, persistent liquidity issues, external currency deficiency, as well as diversion from core banking pursuits to speculative non-banking activities. It suggests banks develop and implement credit scoring and assessment methods, update insider lending practices, and adopt prudential business governance methods.