A Preliminary Study on Credit Risk Management Strategies of Selected Financial Institutions in Malaysia

Commitment to prudent lending is an important and current issue of discussion in the global banking system today. Banking prudence and efficiency to manage their risks in different business cycle and environment would help to alleviate crises and losses. The effective management of credit risk is an essential component of a comprehensive technique to risk management and critical to the long-termsuccess of all banking institutions. This study aims to investigate the type of risk management strategies and monitoring practices implemented by financial institutions in Malaysia. The sample consists of fifteen institutions and this study found that diversification of loan services, risk mitigation and training and development of staff are three most popular practices implemented by financial institutions. Lastly, this paper is one of the first that attempts to use primary data in credit riskmanagement strategies which is a significant contribution in the area of finance.