The Relationship Between the Financial Performance of Banks and the Quality of Credit Scoring Models

Model risk in credit scoring can be understood as the bank’s losses associated with a model quality deterioration. Deterioration entails an incorrect assessment of creditworthiness borrowers and leads to increase potentially defaulting applications loan portfolio, bank relies on performance when making lending decisions. The relationship between financial is embedded confusion matrix, where value type I error indicates lost profit, II equivalent event default. We propose estimating based scenario forecast or ranking ability Gini over given time interval. result analysis net present for current modified models, depending approval level. proposed approach allows us solve problem optimal choice answer question how affects performance.