Managing Credit Risk over the Business Cycle and Through the Pandemic: Hit Me with Your Best Shot

Sessions

The market and the regulatory community pay close attention to a financial organization’s credit culture because a strong credit culture is critical to the success of credit risk management.

The session describes 14 credit discipline tools help management to implement, maintain, and ensure that credit risk and the credit culture stay on track.  These 14 tools offer an expedient way to test the quality of credit risk management but also serve as techniques for remediating and improving credit culture and credit risk management:

  1. Written credit policies: Written policies applicable to all the bank
  2. Risk-driven credit analysis: Scope and depth increase with risk and total borrower exposure
  3. Uniform credit packages: One credit package format used across the bank
  4. Experienced underwriting: Underwriters are skilled, trained, experienced, especially in CRE, ABL, etc.
  5. Informed decision-making: Credit approver has enough information in time to make sound decision
  6. Proper loan approval: Credit approver with sufficient authority approves the loan
  7. Valid, granular risk rating system: No bunching–enough grades to evaluate both default and loss probabilities
  8. Legally enforceable loan documents: All the docs needed to ensure legally, enforceable loan gets closed
  9. Reliable closing and booking: Loan is closed and booked as approved
  10. Loan performance monitoring and reporting: Periodic, frequent monitoring and reporting of asset quality
  11. Independent loan review & audit: Loan review and audit are independent of lending units they monitor
  12. Adequate ALLL: ALLL is sufficient to absorb losses
  13. Skilled problem asset management: Problem assets are transferred from line lender to problem asset officer
  14. Credit and lending training: Training is conducted regularly for all levels of credit risk and lending

SPEAKER:
Dev Strischek
Principal
Devon Risk Advisory Group LLC