دور حوكمة الشركات في الحد من مخاطر الائتمان في القطاع المصرفي

Abstract EN

Lack of actual practice to exercise corporate governance, in order to reduce credit risks is one of the most important problems to face the banking sector.

Working to realize a high possible return on investment throughout performing its business as usual the banking sector might thus face a major credit risks in carrying on such business.

Therefore, the banking sector should carry out risk measurement, determine and work out to reduce such risks, in order to realize an acceptable return on investment ratio, as well as to make a balance between return and risk.

By so doing the banking sector shall take into consideration liquidity, security and profitability aspects in making any decision in respect of investment.

On the other hand procedures and studies conducted by banks prior to grant of credit are in most times considered as insufficient, this is in addition to lack of sufficient financial analysis regarding credit requests, along with weakness of guarantees provided for by clients, as well as absence of effective control system in banks.

All said reasons have collectively led to the emergence of bad debts and credits facilities.

So it is evident that effectiveness of exercising corporate governance in the banking sector is one of the most factors affecting its profitability.

That is to say corporate governance has the ability to affect the balance between income and risks, modality of income increase, costs reduction and interest rates.

But, whenever, profitability increases, interest rates on loans increase too and decrease in respect of deposits.

To reduce credit risks is to start to apply perfect corporate governance,.however, Management on the other hand and methods of audit thereon may help in making implementation of corporate governance successful, a process which needs a high degree of transparency.

Generally speaking the most important characteristic of weakness in banking institutions are that which relating to composition of boards of directors and responsibility thereof or that which relating also to issues of disclosure, transparency and minority rights.

For that reason the researcher is in the opinion to enhance sound corporate governance practices in the banking sector because the absence of the same means anarchy and collapse.

The research aims to achieve the following: 1- Analysis of causes affecting the appearance of corporate governance terminology.

2- Study corporate governance concepts, principles and objective and to know its positivities.

3- To know the essence of credit and its risks, as well as to determine mechanisms to resolves bank insolvency.

4- To know the impact of Basel Committee Declarations on the level of bank credit risks.

5- Conduct field study to test the extent of validity of corporate governance application on reducing credit risks in the banking sector.

To serve research objectives the following hypotheses have been tested: 1- Lack of transparency and disclosure's availability has a correlation with increase of rates of corruption in financial institutions.

2- There is a relevant correlation between lack of transparency and disclosure and increase of rates of corruption within the financial institutions.

3- A credit decision which based on quality of information credit provided by clients leads to establish a high quality portfolio of loans.

4- Lack of performing credit analysis and sufficient studies prior to the process of granting finance increases the exacerbation of debts crisis 5- There is a relevant correlation between the characteristics of audit quality and its role in increasing its effectiveness in banks.

The researcher then analyzed and proved the validity of the said hypotheses and reached the following findings: 1- Interest in expansion of disclosure and transparency as a result of effective implementation of corporate governance's principles in response to users and decision makers needs.

2- Increasing interest of banks to encourage clients to apply corporate governance to achieve a more credibility upon making banking decision, which may in turn reduce credit risks and hence to reduce problems of insolvency and its negative impacts on the state total economy.

3- A risk that accompanying the process of credit facilities reduced in a considerable manner in respect of credit decision based on sound application of corporate governance in economic units.

Bad debts lead to a number of impacts and negative consequences which affect both the banks, market and clients and further extend to affect national economy as a whole, and in particular it affects climate of investment, disequilibrium of balance of trade, national income and the state public budget, as well as reducing economic growth rates..