Lending

14 Pages 3460 Words

Continuous Assessment Question
Lending


¡§Given the current economic downturn in the Irish Economy, it is inevitable that the book quality will be affected in the case of most Financial Institutions in the country.¡¨


What measures should lenders take to protect themselves from loan losses, under these circumstances?



Table of Contents:


Executive Summary Page 4

PART I ¡V Protection Measures Page 5-15
Introduction Page 5
Section I ¡V Credit Policy Page 6
Section 2 ¡V Credit Grading & Control Page 8
Section 3 ¡V Credit Review Page 12
Section 4 ¡V Training & Development of Staff Page 13
PART II ¡V Social responsibility to Customers Page 14
Bibliography Page 16

Executive Summary
The Lending banker¡¦s has a broad range of measures to adopt when protecting the bank from loan losses. This paper review these measures in Part I in terms of a ¡¥balanced scorecard¡¦ approach, focusing in turn on Credit Policy, Credit Grading & Control as well as training and development of staff.
In Part I of this paper, I will argue that each of these aspects need to be addressed in order to mitigate the exposure of the bank to loan losses. Each section examines the specific measures that a bank may take and outlines the critical factors when contemplating such measures. The role of Credit Policy, will highlight a number of basic measures a bank must take to ensure it has the capability to minimise loan losses, while the role of Credit Control will focus on early detection and the using of action plans to mitigate such losses. A strong Credit Review function is essential in ensuring lenders have accurately identified and reported potential loan losses (bad and doubtful debts). And finally the part to be played by training and development of a range of staff in the credit management of loans is crucial to building the appropriate competence levels throughout the bank. All of these factors constitute a ¡Â...