Credit Granting Processes for Banks in Sweden : Differences in credit granting processes for households and companies

Abstract: The borrowers in the mortgage market consist of both households and companies. Themain source for financing a property weather it is a private property or a real estateproperty is a mortgage. When granting a mortgage the bank incurs a risk. It is importantfor banks to minimise the risk since an unstable market can affect not only the bank andits customers but society as a whole. This thesis concerns the credit granting processand the difference in credit granting for households and companies and if there is aneed of a difference between the processes.The research method used for this report is a deductive approach with qualitativeresearch performed through in-depth, face-to-face interviews. As the number of banksin question is small we have used a case study approach which is suitable as focus lies onthe processes rather than the outcome of credit granting.The assessment of creditworthiness and repayment ability is the most important factorsof the credit granting processes for both parts of the market. There are differencesbetween the credit granting processes between the different parts of the market. Whenassessing the creditworthiness and repayment ability of a company there are moreparameters to evaluate. The mortgage amount for a real estate is greater than the one ofa private property and the private part of the market is regulated to a greater extent. Thefocus on the private part of the market is consumer protection and on the corporatepart the banks credit risk. Differences between the processes are needed for the bank tobe able to assess the creditworthiness and repayment ability for both households andcompanies in debt to decrease their credit risk.