Importance The article deals with the problem of assessing the credit quality of corporate borrowers and cash flows as an essential characteristic feature of the corporate borrower's quality category. Objectives The objectives of the article are to analyze the effective legal framework and make recommendations to improve the credit quality assessment of potential borrowers. To achieve the objectives, we had to solve the following tasks that determined the logic and structure of the study, i.e. to clarify the cash flow concept; to highlight the importance of future cash flows valuation for rating the credit quality of a corporate borrower; to characterize the monetary policy of companies; to identify the impact of financial condition of a group of companies on the ability of an individual holding participant to repay its liabilities. Methods In this paper, we assessed the condition of the loan portfolio of Russian banks, using a retrospective analysis. The analysis showed deterioration of the financial situation in the country and tightening of prudential supervision by the Bank of Russia. Results The study presents the approaches of foreign and domestic authors to the definition of the cash flow concept. It highlights the need to assess a cash flow and conversion of assets into cash over a certain period of time, namely, the period of lending, in order to assess the credit quality of a corporate borrower. We identified that participation in a holding company has a strong impact on the monetary policy of each structure included in it. We presented recommendations to assess the solvency of a potential borrower, characteristics of the cash policy of a company, and defined the cash flow concept. Conclusions and Relevance The research results can be used in academic activity while teaching the Banking Risks course, as well as and in practice, to rate the credit quality of corporate borrowers.
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