Methods of Guaranteeing the Performance of the Obligation as a Means of Credit Risk Management

Credit obligations are obligations arising from the credit agreement concluded between the parties.In order to ensure the implementation of obligations, a number of regulatory methods have been defined by legislation.A guarantee of credit is a set of conditions and obligations that ensure the creditor will be properly returned the loan and interest due to the use of the loan.Loans are the biggest source of arising of credit risk.One of the most common and important risk mitigation techniques in financial markets is the use of guarantee.When concluding a loan agreement, the type, amount, term, etc. of the loan depending on the elements, a security agreement is also concluded to ensure the performance of the loan obligation.Granting a loan with security both encourages the borrower to be more responsible in the performance of his/her obligations, and also compensates to a certain extent the damage caused to the credit institution if the loan obligation is not fulfilled by the borrower.