A New Hybrid Approach Based on Fitch Ranking and Data Envelopment Analysis to Evaluate the Credit Performance of the Bank's Legal Clients

Implementing a credit rating system considering banks' deferred claims is one of the most important means of controlling credit risk in banks and financial institutions. In the case of banking facilities, the possibility of non-repayment of facilities is one of the most important issues. By identifying various factors that affect the non-repayment of bank facilities, it is possible to provide a framework for reducing and controlling the credit risk of banks and improving the crediting process. The purpose of this paper is to examine the relationship between efficiency and risk in the banking system.

In this research, a sample of 24 companies from the most important legal customers of 11 branches of the Melli Bank of the city of Arak has been studied. 18 variables affecting credit risk were identified in this paper. Among the variables available, 6 variables were selected using the Factor Analysis Technique and Expert judgment (Delphi method), of which 3 were inputs and 3 were formed the outputs

The efficiency and rank of legal firms were obtained with the help of Data Envelopment Analysis models, and then using the Fitch Institute's data and the efficiency of legal clients, the credit rating of each of the legal firms and their qualitative analysis was expressed.

 Accordingly, using the method of data envelopment analysis and data provided by the Fitch Ratings Institute, the credit risk of Arak's Melli Bank's legal customers is assessed and ranked