Answer:
A bank's credit policies and procedures should provide a road map for staff to develop, originate and document loans that are within the bank's risk appetite. The policies should spell out:
- the bank's lending territory
- acceptable and non-acceptable types of loans
- guidelines for concentrations of credit
- acceptable collateral, valuation methods and value ratios
- covenant requirements
- industry specific limits (buckets)
- industry specific approval requirements
- officer and committee lending limits
- board and management loan committee responsibilities
- loan documentation requirements by type of loan
- guidelines for purchasing or participating in loans originated by other banks or brokers
- guidelines for loans to employees, officers, directors and shareholders
- procedures for reporting and collecting delinquent loans, placing seriously delinquent loans on non-accrual and charging off uncollectible loans
- guidelines for maintaining/disposing of foreclosed property
First published on BankersOnline.com 11/24/08
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