Theoretical and Applied Economics
No. 8 / 2012 (573)
Prepayment risk, impact on credit products
Bucharest Academy of Economic Studies
Abstract. Credit pricing is always an important aspect of operations of banks, as loans are generally two thirds of bank assets. Therefore, the study of factors influencing a bank customer behavior and their impact on early repayment of loans may have a significant influence in reducing the risk assumed by such unexpected operations.
Objective analysis of prepayment risk is to estimate the probability of repayment to better manage its manifestation. The existence of potential customers that use this option exposes the bank to a number of risks, such as interest rate risk, the maturity mismatch risk and liquidity risk.
Proper evaluation and forecasting the evolution of this risk can bring great benefits for a credit institution in the management of loan products and customer relationship: lower risk of over-ensure against fixed rate mortgage, a better management of short-term and long term liquidity needs (thus reducing the risk of over-financing) can offer customers more competitive pricing (achieved by reducing funding costs due to better assessment and management of risks involved early repayment).
Contents
The new economic geography and regional policy in Romania
Recent evidence on concentration and competition in Turkish banking sector
Solutions against crisis applicable to the oro-dental health system in Romania
The bad public decisions’ ripple – setting the education off balance. Marketing simulation – education design decisions
Prepayment risk, impact on credit products
Financial stability, monetary policy and budgetary coordination in EMU
Central Bank independence
Re(De)-Forming public administration: an expert outlook on reform planning in Romania
The economic crisis – implications on methods and instruments used in quality of life studies
The Wagner hypothesis from the perspective of the Romanian economy
Effects of interest rate, exchange rate and their volatilities on stock prices: evidence from banking industry of Pakistan
Considerations on hospital financing in the context of health care decentralization