OVERVIEW OF THE CREDIT PROCESS

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

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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

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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

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

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