My supervisor charged me with finding information online about the 1-8 risk rating models from the OCC and the FDIC. I thought at first this would be a piece of cake, it hasn't been...help! I'm not exactly sure what he's looking for, but I've searched both sites and haven't found anything dealing with a 1-8 risk rating...any help?!

The OCC discusses credit risk ratings in several manuals linked on their website. The books you should review are Allowance for Loan and Lease Losses, Rating Credit Risk and Loan Portfolio Management.

The RMA has a few very good articles and booklets that can be purchased which discuss various rating systems. It is now called the Risk Management Association, no longer Robert Morris. The more sophisticated systems now have more than 10 gradations. I thought the regulators only used the standard 5 grades (normal, special mention, substandard, doubtful, and loss).

I'm trying to develop the same thing. Where would an FDIC regulated community bank find the risk rating model and definitions? Would it be similar to the OCC's?

We are a state non-member bank, so we are examined by the FDIC and they use the following risk ratings: pass, special mention, substandard, doubtful, and loss.

Our bank uses 7 grades in assigning credit risk to all loans and they include 3 pass grades, then special mention, substandard, doubtful, and loss. We use a spreadsheet that considers the 5 C's of credit plus documentation. Those grades are then weighted to determine the overall risk grade. We just went through a safety and soundness exam and with these worksheets in file that detail how the bank evaluates credit risk, the FDIC couldn't disagree with any ratings. The worksheets also make sure the lenders do their evaluation of the credit completely as they have to to be able to complete the worksheets properly. The worksheets help loan review as it takes some of the guess work of why the lender approved the loan. We use two different spreadsheets, one for commerical loans and another for consumer loan.

If you are interested in seeing them, e-mail me at ghartz@peoples-bank.com