Start Date: 9/24/2020 1:00 PM MDT
End Date: 9/24/2020 2:30 PM MDT
The traditional five Cs of credit serve as the foundation for the assessment of credit risk inherent in loan origination and ongoing monitoring of the institution’s loan portfolio. Of the five Cs, capacity is often the most important factor in credit risk assessment. As part of safe and sound banking practices it is incumbent for an institution to provide for consideration, prior to credit commitment, of the borrower’s overall financial condition and resources, the financial responsibility of any guarantor, the nature and value of any underlying collateral, and the borrower’s character and willingness to repay as agreed (Appendix A to Part 364-Interagency Guidelines Establishing Standards for Safety and Soundness).
For this reason, accurately determining a borrower’s ability to repay is critical, especially in times of economic instability. This presentation will focus on the factors which could lead to inadvertent errors in the calculation of debt coverage, which could prove to be costly in the credit relationship if the institution incurs loss. Losses and potential erosion of capital are of greatest concern; however, institutions must consider the negative impact erroneous credit decisions (caused by underwriting errors) may have on the borrowing entity and its ownership. Prudent decisions based on accurate determinations protect the institution and the interests of borrowers and related entities.
Attendance certificate provided to self-report CE credits.