Seven Habits Of An Effective Credit Administration

This webinar session by Dev Strischek is intended to provide guidance on how to develop and maintain a Credit Administration (CA) function that will provide guidance to anyone involved in the credit function of the bank. The session also highlights the safeguards to manage the bank’s loan portfolio in a safe and sound manner.

CA supports credit risk management by watching over credit policy, credit analysis and underwriting, credit approval, credit extension, loan administration, and portfolio management. It also includes ensuring that credit policy exceptions and loan documentation exceptions are mitigated, that credit files and loan documentation are secure.

Credit administration (CA) connects the organization’s credit strategy, credit approval, credit extension, and credit management tasks into a coherent credit risk management function. Whether in the backroom or the front room, CA is necessary to provide a smooth transition from a prospective client to the creditworthy borrower. Analysis and approval is only part of the story; once the loan is made, the borrower’s performance must be monitored in order to ensure repayment on time, in full, and as agreed.

In the Credit Administration area, well-managed and successful banks have seven distinct characteristics. This course will evaluate the reasoning and requirements for each of these characteristics so that participants can begin the process of developing such a culture within their respective organization.

• Credit policy—critical components and maintenance
• Credit analysis and underwriting—guidance on determining repayment ability from cash flow, collateral, and guarantees; global cash flow and debt service ratios, collateral loan-to-values, adjusting net worth of guarantors
• Credit approval—lending authorities, risk ratings, and pricing guidance
• Loan closing, booking, and funding—appropriate loan documentation
• Portfolio management—credit policy and loan documentation exceptions, covenant compliance, asset quality tracking
• Credit and loan documentation files—confidentiality and security
• Problem asset management—policy and practice

Effective credit administration is critical for the health and stability of financial institutions. Itr starts with a comprehensive understanding of the credit risk associated with each borrower. This involves analyzing the borrower's financial statements, credit history, industry position, and macroeconomic conditions. A robust risk assessment helps in identifying potential red flags and mitigating risks before extending credit.