Credit risk is the risk of financial loss stemming from a counterparty’s or customer’s failure to meet its contractual obligations; it arises primarily in connection with Bondora´s loans and advances to borrowers. Bondora´s credit policy sets forth lending guidelines in accordance with its business strategy and risk management policy that are designed to maximize returns and ensure compliance with local regulatory requirements. The Head of Credit Risk oversees Bondora’s credit risk.
The main credit risk department functions of the scoring and pricing functional teams are: review and analysis of credit risks; statistical analysis and scorecard preparation; internal risk credit management policy development; default and associated loss probability calculations; and monitoring and improving credit scoring and decision-making systems. Bondora continually seeks to improve its credit scoring and underwriting processes.
Loan credit risk is managed by assessing multiple indicators prior to a loan being issued, which include, but are not limited to, borrower credit history and income levels checks. The indicators are nonsubjective; they are based purely on statistical evidence and scored automatically. Credit scoring models are adjusted to account for specific social borrower group and country requirements, which may, for example, impose special obligations with regard to borrower solvency checks.
Credit scoring models are periodically reviewed and, if necessary, adjusted to keep pace with shifting market and client group tendencies. Bondora has implemented country-specific debt collection procedures to ensure efficient and timely debt collection. The repayment performance of delinquent borrowers is analyzed on a regular basis. Bondora believes its procedures are sufficient to effectively monitor the credit risk of its delinquent borrowers.