Title: The amortization requirements' impact on banking operations organization and credit assessment
Authors: Annie Majlöf and Therese Hasselgren
Supervisor: Titti Eliasson
Examiner: Eva Berggren
Keywords: Credit assessment, organization change, banks, amortization requirement
Purpose: The purpose of our study is to increase the understanding and to find out how a regulation change, as the amortization requirement, may affect and change the organization and credit assessment in various banks.
Problem background: Swedish households are currently highly leveraged where the high indebtedness is partly a result of low amortization rate. Measures to reduce debt may therefore be necessary to reduce households' sensitivity to economic disruptions. If the amortization rate increases, the high leverage of households would attenuate. For this reason, an amortization requirement is introduced with the purpose of reduce debt and increase households’ resistance. If the market requires change it is necessary that organizations change accordingly. As a result of new regulations and requirements the need of change arises and directly affects organizations, such as adaptation of procedures and processes, internal systems and skill development.
Research problem: How can the amortization requirement affect and change the organization and credit assessment in banks?
Method: This study is of qualitative character since the empirical material consists of qualitative interviews. The intention is to acquire increased comprehension rather than to make generalization possible. We derived our empirical study based on our theoretical framework in order to later analyze the two parts. Based on the analysis we have been able to draw conclusions and to bring discussion.
Conclusion: The study came out into that the amortization requirement creates a rational and a saner repayment culture. As a result of the regulation change there has been some change in the banks’ organization in various aspects. A conclusion is that the credit assessment when granting credit is more restrictive and limited as a result of the requirement claim. However, the amortization requirement constitutes a varied impact on banks’ organization and credit assessment process.