TE Study Guide - Loans (3.2) | QUE & ANSW
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Terms in this set (445)
How does the Loan section relate to Appendix A to Part 364 for Establishing Standards
Part 364? for Safety and Soundness has operational and
managerial standards for AQ, internal controls,
credit underwriting, and loan documentation.
True or False - The Board is legally True. The Board should form and supervise their
responsible for formulating Lending implementation.
Policies?
What does it mean that the Lending It means that the Policy be reviewed periodically
Policy is not a static document? and revised in light of changing circumstances
surrounding the borrowing needs.
,What areas need to be addressed in - Field/kind/types of loans the bank will engage
a bank's Lending Policy? (17 items) - Lending authority of each loan officer
- Lending authority of loan or executive committee
- Responsibility of BOD in reviewing, ratifying, or
approving loans.
- Guidelines for unsecured loans
- Guidelines for rates of interest and terms of
repayment for secured and unsecured loans.
- LTV limits and documentation required.
- Guidelines for obtaining/reviewing RE appraisals
and for reordering them
- Maintenance and review of borrower credit files
for complete/current information
- Collection procedures
- Loan to Asset limit
- Overdraft limit
- Normal trade area description
- Portfolio mix goals and plans with concentration
risk.
- Loan review and grading system (Watch List)
- ALLL guidelines
- Environmental liability guidelines.
What do the terms Loan Review The responsibilities assigned to various areas such
System or Credit Risk Review System as credit underwriting, loan administration, problem
refer to? loan workout, or other areas.
What responsibilities may be - Assigning initial credit grades
included in a Loan Review System or - ensuring grade changes are made when needed
Credit Risk Review System? - compiling information necessary to assess the
ALLL/ACL appropriateness
, Should smaller banks that don't have Yes.
a separate loan review department
still have an effective Loan Review
System?
An effective Loan Review System - Promptly identify loans with well-defined credit
should address what 7 things? weaknesses
- Provide essential info for determining
appropriateness of the ALLL
- Identify relevant trends affecting the collectability
of loan portfolio
- Evaluate the activities of lending personnel
- Assess adequacy of and adherence to loan
policies and procedures and evaluate compliance
with laws and regulations
- Provide Board and senior management with
objective assessment of portfolio quality
- Provide management with info useful for financial
and reporting purposes.
Credit Risk Rating and Grading - Assessment of credit quality
Systems typically involve what? - The identification of problem loans
- Assignment of risk ratings
Credit grading systems place primary Loan Officers
reliance on who for identifying
emerging credit problems?
Should the Loan Officers assignment Yes, reviews may be made by peers, superiors, loan
of a credit grade be subject to committee, or other internal or external specialists
review?
Is independence preferred for credit Yes, since they can often provide a more objective
grading reviews? assessment of credit quality.
Save
Terms in this set (445)
How does the Loan section relate to Appendix A to Part 364 for Establishing Standards
Part 364? for Safety and Soundness has operational and
managerial standards for AQ, internal controls,
credit underwriting, and loan documentation.
True or False - The Board is legally True. The Board should form and supervise their
responsible for formulating Lending implementation.
Policies?
What does it mean that the Lending It means that the Policy be reviewed periodically
Policy is not a static document? and revised in light of changing circumstances
surrounding the borrowing needs.
,What areas need to be addressed in - Field/kind/types of loans the bank will engage
a bank's Lending Policy? (17 items) - Lending authority of each loan officer
- Lending authority of loan or executive committee
- Responsibility of BOD in reviewing, ratifying, or
approving loans.
- Guidelines for unsecured loans
- Guidelines for rates of interest and terms of
repayment for secured and unsecured loans.
- LTV limits and documentation required.
- Guidelines for obtaining/reviewing RE appraisals
and for reordering them
- Maintenance and review of borrower credit files
for complete/current information
- Collection procedures
- Loan to Asset limit
- Overdraft limit
- Normal trade area description
- Portfolio mix goals and plans with concentration
risk.
- Loan review and grading system (Watch List)
- ALLL guidelines
- Environmental liability guidelines.
What do the terms Loan Review The responsibilities assigned to various areas such
System or Credit Risk Review System as credit underwriting, loan administration, problem
refer to? loan workout, or other areas.
What responsibilities may be - Assigning initial credit grades
included in a Loan Review System or - ensuring grade changes are made when needed
Credit Risk Review System? - compiling information necessary to assess the
ALLL/ACL appropriateness
, Should smaller banks that don't have Yes.
a separate loan review department
still have an effective Loan Review
System?
An effective Loan Review System - Promptly identify loans with well-defined credit
should address what 7 things? weaknesses
- Provide essential info for determining
appropriateness of the ALLL
- Identify relevant trends affecting the collectability
of loan portfolio
- Evaluate the activities of lending personnel
- Assess adequacy of and adherence to loan
policies and procedures and evaluate compliance
with laws and regulations
- Provide Board and senior management with
objective assessment of portfolio quality
- Provide management with info useful for financial
and reporting purposes.
Credit Risk Rating and Grading - Assessment of credit quality
Systems typically involve what? - The identification of problem loans
- Assignment of risk ratings
Credit grading systems place primary Loan Officers
reliance on who for identifying
emerging credit problems?
Should the Loan Officers assignment Yes, reviews may be made by peers, superiors, loan
of a credit grade be subject to committee, or other internal or external specialists
review?
Is independence preferred for credit Yes, since they can often provide a more objective
grading reviews? assessment of credit quality.
