Credit Risk Management in the Context of Economic Volatility

Abstract

Credit risk is always a crucial factor affecting the stability and development of the commercial banking system, especially in the context of an economy impacted by shocks such as the Covid-19 pandemic and recent geopolitical fluctuations. This article provides an overview of the basic theories and practices of credit risk management, while emphasizing the shift from the traditional method of assessing non-performing loan ratios to a probabilistic approach based on economic cycles. Based on an analysis of macroeconomic factors and banking specifics, the article proposes an integrated credit risk management framework, combining econometric models and forecasting techniques, with the goal of enhancing early warning capabilities and ensuring sustainable development for commercial banks in Vietnam.