What does monitoring in credit risk management primarily involve?

Monitoring in credit risk management primarily involves ongoing assessments of a borrower's financial health and creditworthiness after the initial loan has been granted. This process is crucial to ensure that any changes in the borrower's ability to repay the loan are identified promptly.

Determining new levels of credit risk connected with a borrower focuses on measuring how factors such as changes in income, financial stability, and market conditions impact the likelihood of default. This continuous evaluation is essential for lenders to make informed decisions regarding potential adjustments, such as modifying loan terms or addressing emerging risks before they result in losses.

The other options do pertain to aspects of credit risk management but do not capture the essence of the monitoring process. Evaluating past loan performance tends to focus more on historical data rather than real-time assessments. Assessing market interest rates is vital for understanding market conditions but is not directly related to monitoring a specific borrower's credit risk. Reviewing credit history of potential borrowers is a pre-loan assessment rather than an ongoing monitoring activity once the loan is active.