Showing papers on "Credit reference published in 1970"

A Credit Scoring Model for Commercial Loans

Abstract: An increasing number of credit scoring models have been developed in recent years as a scientific aid to the traditionally heuristic process of credit evaluation. With few exceptions these models are designedfor screening consumer loan applications. The purpose of this paper is to present a credit scoring model for commercial loans. The model is limited to the evaluation of existing loans and could be used by bank loan offiicers for loan review and by bank regulatory agencies for loan examination.

Credit control system

Abstract: A credit control system which positively authorizes every credit purchase, furnishes account balance status and accumulates the dollar amount of every credit purchase. Customer account numbers, status, credit limit and account balance are stored in a magnetic memory. Remote keyboard units interrogate the memory as to account number and amount of purchase for each purchaser. If the status of the account is valid and there is a positive credit balance, a credit authorization signal is received at the remote keyboard unit. If the status of the account is invalid, or if the status of the account is valid and the credit balance is negative, a credit denial signal is received at the remote keyboard unit, and a credit authorizer unit is activated. The credit authorizer unit permits manual electronic inspection of the credit file of interest to determine if credit should be authorized for the current transaction. If credit is to be authorized, or denied, a credit authorization, or denial signal is received at the remote keyboard unit.

The availability of credit and corporate investment

Abstract: UNTIL RECENTLY most economists agreed that Federal Reserve monetary policy had little effect on real-spending decisions. This opinion-supported by a considerable empirical literature-was based on two allegations: (1) that the Federal Reserve has little effect on interest rates, and (2) that interest rates are not a significant factor in decisions concerning consumption or investment expenditures. Perhaps the most interesting counterargument is the notion that Federal Reserve credit policy operates in the economy not through its effect on borrowers, but through its effects on lenders. This has become known as the Availability Doctrine. Although the doctrine's first formal statement is only about 20 years old, its origin goes back to the 1920's. Recently it has undergone criticism which has considerably improved its rigor. Given that this hypothesis remains generally accepted by both central bankers and commercial bankers, it seems desirable to study it in detail. This is the purpose of this work. The study seeks answers to two basic questions: (1) Is the Availability Doctrine based on assumptions consistent with the usual postulates of rational decisionmaking? (2) What is the effect of availability limitations on the spending plans of economic units? The first question can be answered in the affirmative. An explanation of non-price rationing of credit is sought with considerable success in the study of (a) decisionmaking under conditions of uncertainty and (b) relationships among firms in a market characterized by imperfect competition. However, this discussion leads to the conclusion that availability effects are likely to affect small firms but not large. This is not surprising given the facts that higher risk is associated with smaller firms and that imperfectly competitive markets tend to favor the larger establishments. The answer to the second question requires that credit rationing be measured empirically. However, a direct measure of the extent on non-price rationing in credit markets is impossible since the variable sought-the amount of credit desired but not received-is not observable. This necessitates the use of a proxy variable that could be expected to move in a predictable manner when rationing appears. A number of variables that might be correlated with rationing are factor-analyzed in the hope that a common factor could be found to identify with rationing effects. The most-promising series extracted relates mainly to the percentage of new bank loans being granted to large firms. This is in accordance with the argument that the mostplausible explanations for rationing imply discrimination against small firms. The research concludes with studies of plant and equipment investment and of inventory accumulation by manufacturing firms. Investment data published by the Department of Commerce and the National Industrial Conference Board make it possible to break down investment expenditures into two broad asset-size categories. The FTC-SEC Quarterly Financial Reports give sales, inventories, and balance sheets of manufacturers in the same asset-size classes. Three interesting differences between small-firm and large-firm behavior emerge:

Regional distribution of bank credit: a critical view.

Abstract: An analysis of the latest trends in State-wise and industry-wise distribution of bank advances is neccessary in ordgr to formulate appropriate follow-up measures and also to plan credit for the future. Only after gathering such information can one plan for higher growth rate of deposits in underdeveloped States or for certain regions within a State and then correspondingly plan for the credit requirements of these States or regions. An attempt is made in this article to analyse the trends in credit-deposit ratios, the comparative rise in deposits and credit over the two-year period ending 1968, and the percentage share of deposits and credit of districts within a State. Suggestions are then broadly made to suggest future lines for action to correct the imbalances and provide opportunities for growth.