The causes of the financial crisis in the United States and other geographies are well known to the world today. However, the question presents itself: couldn’t these institutions have reduced their chance of failure by using a well-developed early detection system such as stronger loan review practices?
It is critical to assess if the quality of the portfolio is actually of the same quality as that is reported to the management and that any critical factors that are indicative of increased risk are not overlooked by the underwriters as well as policy makers.
Aptivaa possessesthe experience to assist banks in a thorough loan review and can customize its approaches to meet unique needs of its clients and benchmark them against standards issued by regulators.
Loan Review involves the following steps:
- Credit Risk Assessment on loan samples.
- Credit Initiation: Review of initial underwriting including analysis of the following: financial statements; primary and secondary source of repayment; management; and appraisal
- Loan Structuring: Evaluation of repayment terms against the borrower’s ability to repay and industry best practices; guarantees; environmental indemnification; and other loan terms
- Normal Loan Monitoring: Verification of on-going monitoring, as appropriate. Examine the conduct of account and follow up looked at by line functionaries
- Problem Loan Management: Evaluation of problem loan management including reporting to senior management and downgrading of delinquent loans
- Detect early warning signals and suggest remedial measures thereof