Credit assessment evaluates a debtor’s financial reliability. Before granting loans, lenders assess whether a contractual partner can meet their financial obligations. This evaluation is conducted by banks, financial institutions, or companies offering supplier credits. Additionally, creditworthiness can be monitored regularly during the contract term to detect changes in the risk profile at an early stage. If creditworthiness deteriorates, creditors may take steps such as reassessing loan conditions.
Under the Standardised Credit Risk Approach (SCRA) as defined by CRR III, credit assessments are expanded to include ESG criteria. Beyond financial metrics, environmental, social, and governance factors are integrated into risk evaluations. These regulatory requirements enable a more holistic credit risk analysis and encourage sustainable financing decisions.
