Using Credit Risk Ratings to Determine Asset Quality (Asset Quality Ratings)

The “A” in the CAMELS rating system used by bank regulators is perhaps one of the most important factors they consider when examining financial institutions. “A” represents Asset Quality, and it is scrutinized extensively when banks are examined. Studies continue to indicate the primary reason banks fail is poor Asset Quality, followed closely by poor policies, procedures and management. Asset Quality is so important that it forms the basis of capital requirements assigned by regulators and is viewed by the investment community to establish value.

Banks approximate Asset Quality and the potential for complete repayment by using Risk or Credit Ratings. Credit Ratings are based on the financial institution’s underwriting standards. If a financial institution's underwriting standards are weak, then Credit Ratings won't properly reflect the risk in the loan portfolio.

Regulators expect community banks to have credit risk management systems that produce accurate and timely risk ratings. Regulators consider accurate classification of credit risk among their top supervisory priorities. Learn how to establish or improve the risk rating system in your financial institution.

Covered Topics:

  • Underwriting Standards Required to Expose and Establish the proper Credit Risk Rating
  • Key Control Attributes Required for the Grading System to be Effective
  • Regulatory Classification of Assets
  • Areas of Exposure to Consider When Assigning a Risk Rating
  • Latest Developments in Rating Credit Risk
  • Establishing a Clear and Measurable Method of Assigning Credit Rating that is More Objective and Less Subjective
  • Using Credit Risk Rating to Establish and Maintain an Adequate Allowance for Loan and Lease Losses

Who Should Attend?

Senior/Chief Credit Officers, Consumer Loan Officers, Loan Review Officers, Branch Managers, Commercial Loan Officers, Credit Analysts, Compliance Officers, Senior Loan Officers