development of a credit policy for markets subject to credit rationing

Effective credit policy is an essential condition for bank’s successful operation. In this article methods of developing a credit policy that accounts for information asymmetry and «reverse selection» effect in the credit market are considered. In the course of research, relationships between interest rates, “pass” credit score, total bank’s income, average profitability of a credit product and the amount of capital required to be allocated to a new product, were revealed. Noting these relationships, bank’s credit department is able to set optimal interest rates, credit score and capital, as well as to apply credit rationing, if necessary.