REFINANCING BY EVALUATING REAL ESTATES COVERED BY BANKS’ PROBLEMATIC RECEIVABLES BY SECURITIZATION METHOD

Abstract

Credit risk for banks and financial institutions includes the issues of non-repayment of the loan on the due date, problematic loans and non-performing loans.

Non-performing loans show the asset quality of the financial sector in an economy. The term loan is defined as the amount of debt borrowed from banks and financial institutions to serve the certain needs of real and legal persons who have savings deficit, to be repaid at a certain price and on a certain date. If the full repayment of a loan exceeds 90 days of the maturity date, either because of the borrower’s financial position or of general economic situations, that loan becomes a  non-performing loan.

Non-performing loans which are considered one of the basic indicators of the economy, show the ability of real and legal persons’ solvency and the relevant banks’ and financial institutions’ asset quality and risk level.

Putting these values in a realistic way allows economic units to manage their policies and banks to manage their balance sheets effectively as the non-performing loans will negatively affect the capital adequacy ratios of the relevant banks and financial institutions, especially the country's economy, therefore the cost of non-performing loans would be quite high.

Credit restructuring efforts of banks and financial institutions for the solution of such non-performing loans account for critical operational burden. The main purpose of this study is to propose solutions to improve the asset quality of balance sheets by reducing this burden for banks and financial institutions.

In the study, existing applications were examined by scanning method and their insufficient aspects were determined. By adding securitization-based regulations and practices to the current methods in order to make the financial system work more effectively; The capital structure of banks can be strenghtened, operational processes related to non-performing loans can be reduced, default rates can be reduced, it can contribute to solving the financial and managerial problems of companies and increasing the dynamism of the real sector.