The quality of a bank or credit union’s loan portfolio is a key component in the potential risk to depositors and to the FDIC or NCUSIF insurance funds. Therefore the bank’s lending policies, credit administration, and the quality of the loan portfolio is aggressively scrutinized by regulators. With effective policies, credit administration, and loan review process, management can be assured that lending controls protect your institution from significant financial, operational and reputational harm. The right loan review system will help ensure that problem credits have been identified and are appropriately monitored to mitigate losses.
An effective commercial loan review system should include:
CrossCheck Compliance can provide loan review experts to assess your portfolio and enhance your processes. Our loan review services include evaluation of the institutions loan policies and procedures, credit administration function, loan grading system and methodology for calculating its allowance for loan and lease losses (ALLL).
We assess and stratify the commercial loan portfolio based on the nature and dollar amount of the loans, the collateral, source of repayment, structure, etc. This stratification, interagency guidance, and management input, is used to categorize the portfolio by risk, and then determine the appropriate sample of loans to be tested in the loan review process.
Individual credits are then evaluated with respect to the following:
Once the review is complete, we provide management with substantiated recommendations for loan grade changes along with expert recommendations to improve any credit administration or loan policy and procedure weaknesses noted.
Other loan review services we provide include: