overview of the credit process
TRANSCRIPT
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OVERVIEW OF THE CREDIT PROCESS
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OBJECTIVES
At the end of this session participants will be able to; discuss the concept of credit describe the stages of the credit process discuss the role of credit management in banking
2EARLY PROBLEM RECOGNITION - FIRSTBANK 2013
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OUTLINE
Introduction Working Definition Phases of the Credit Process Risk Portfolio Planning Exposure Development Exposure Management Delinquency Management Recovery Conclusion
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INTRODUCTION
Lending activities normally represent the largest source of a bank’s revenue and very critical to bank’s performance and stability
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INTRODUCTION
Good lending and sound banking implies striking a balance between two potentially conflicting principles:
Making reasonable return on lendings
Safeguarding depositors’ funds5EARLY PROBLEM RECOGNITION - FIRSTBANK 2013
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WORKING DEFINITION
CREDIT PROCESS IS THE SYSTEMATIC STEPS THAT MUST BE FOLLOWED IN PLANNING, DEVELOPING AND MANAGING A CREDIT PORTFOLIO IN AN EFFECTIVE AND EFFICIENT MANNER.
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PHASES OF CREDIT PROCESS
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PHASES OF CREDIT PROCESS
Risk Portfolio Planning
Exposure Development and Creation
Exposure Management
Delinquency Management /Loan Workout
Credit Recovery
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RISK PORTFOLIO PLANNING
What kind of portfolio do we want?
Target Market Definition Risk Acceptance Criteria Diversification Growth rates Sectors Corporate or Consumer
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EXPOSURE DEVELOPMENT
Preliminary credit screening Credit application/presentation Credit analysis [qualitative & quantitative
analyses] Credit approval Credit documentation Follow-up/feedback
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EXPOSURE MANAGEMENT
Relationship Management
Individual Loan monitoring
Portfolio Monitoring11EARLY PROBLEM RECOGNITION - FIRSTBANK 2013
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DELINQUENCY MANAGEMENT /LOAN WORKOUT
Remedial Strategies and tactics
Prevention through policy, strategy and structure Early warning signals Loan review Exit strategy Loan restructuring
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CREDIT RECOVERY
Recovery Litigation Receivership Liquidation Use of debt collectors Charge off Combination of the above
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CONCLUSION
The Credit Process is indeed all pervading
Lending is not complete until we have received the bank’s funds back and with adequate returns for the risk taken and the value added
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THANK YOU
15EARLY PROBLEM RECOGNITION - FIRSTBANK 2013