Credit card risk refers to the potential for financial loss that issuers face when cardholders fail to repay their outstanding balances. This risk is influenced by factors such as the cardholder's credit history, payment behavior, economic conditions, and overall financial stability. Credit card issuers assess this risk through credit scoring models and ongoing monitoring of account activity. Effective management includes setting appropriate credit limits, implementing risk-based pricing, utilizing fraud detection systems, and maintaining collections strategies to mitigate potential defaults and losses.

Basel scope:

• Pillar 1
• Pillar 2

Capital requirements:

Mitigated by Capital

Related Links:

•       BCBS 424 - Basel III: Finalising post-crisis reforms
•                 Basel Framework
•                 BCBS 347 - Revisions to the Standardised Approach for credit risk
•                 The Basel framework