Seven Habits of Effective Credit Administration in Commercial Banks

Imagine finding yourself suddenly in a senior credit administration position at your bank due to required personnel changes as a result of frequent credit losses; Or, your bank's credit administration seems disconnected, un-organized and free flowing and lacks effective management oversight; Or you are in a lending position and the credit administration function at your bank fails to provide structure, guidance and leadership. If any of these scenarios point to you or your financial institution, this course will address the factors you need to know to make a positive difference in the credit administration at your bank.

Specifically, this course is intended to provide guidance on how to develop and maintain a Credit Administration function that will provide guidance to anyone involved in the credit function of the bank and to insure safeguards are in place to manage the bank's loan portfolio in a safe and sound manner. This principle is paramount especially in this economic environment and close scrutiny being applied by the regulatory authorities.

There are seven distinct characteristics well managed and successful banks have in their Credit Administration area. This course will evaluate the reasoning and requirements for each of these characteristics so that the participant can begin the process of developing such a culture within their respective organization.

The Seven Characteristics are as Follows:

  1. Well Defined Credit Culture Established and Supported by:
    • An Effective Loan Policy
  2. Highly Effective Risk Assessment and Credit Underwriting System by:
    • Choosing the right personnel to be Credit Analysts, Lenders or Loan Administrators
    • Knowing how to balance Risk and Rewards through proper credit, ratio and cash flow analysis
    • Knowing how to report risk assessment by writing effective credit memoranda
  3. Highly Effective Credit Committee that:
    • Considers all pertinent information
    • Allows members to express their opinion "freely"
    • Records Minutes that matter
  4. Utilize Credit Risk Rating to Identify Risk in the Loan Portfolio by:
    • Clearly defining credit grades and applying them to various types of borrowers
    • Utilizing a clear, objective and measurable loan grading system
  5. Loan Documentation Procedures that will:
    • Identify the Borrower's legal structure
    • Identify, value and properly classify the collateral (emphasizing appraisal reviews)
    • Evidence the debt outstanding
    • Attach the bank's security interest in the collateral
    • Perfect the bank's lien position in the collateral
  6. Effective Loan Portfolio Management by:
    • Defining the expectations of loan officers in the management of their loan portfolio
    • Using Loan Agreements, Covenant Compliance Reports and other monitoring tools to manage the loan portfolio
    • Adopting prudent commercial real estate loan workout strategies for problem loans
  7. Calculating and Maintaining an Adequate Allowance for Loans and Lease Losses
    • Reviewing and Documenting the ALLL methodology

At the end of this session, the participant will have a good road map to build and manage an effective credit administration area of the bank and to satisfy regulators' requirement to operating a safe and sound bank from a credit risk perspective.

Who Should Attend?

  • Directors
  • CEOs & Presidents
  • Chief or Senior Credit Officers
  • Chief or Senior Loan Officers
  • Commercial Loan Officers
  • Bank Accountants
  • Branch Managers
  • Consumer Loan Officers
  • Loan Review Personnel
  • Consumer Lenders

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