40 Questions
What primary attributes does a credit officer seek in a potential borrower?
Capacity to repay and positive behavioural attributes
What does the 5Cs Framework provide to credit officers?
Key characteristics to consider in a potential borrower
What is the relationship between the 5Cs Framework and the credit risk assessment?
The 5Cs Framework is a necessary consideration for credit risk assessment
What aspect of a borrower's profile does Character represent in the 5Cs Framework?
Positive behavioural attributes
What is the purpose of the matrix shown in Figure 5.1?
To describe the different types of borrowers in the market
What is a major concern for lending banks regarding borrowers?
The borrower's ability to meet loan service obligations
Which of the following borrowers may have a poor debt repayment capacity?
Borrowers with negative attitudes towards debt repayment
Why do lenders need to assess a borrower's character?
To gauge their willingness to repay debt
What can change over time to impact a borrower's financial standing?
Their risk profile
Which of the following is NOT a characteristic of a borrower with a poor debt repayment capacity?
Impressive business performance track record
What is the primary focus of the 5Cs Framework in evaluating business credit risk?
A borrower's attitude and willingness to repay debt
Why do lenders need to assess a borrower's credit risk?
To identify potential risks and mitigate them
What is the primary expectation of a borrower's character by the bank?
To possess traditional values of integrity and responsibility
What is considered equally important as traditional values in assessing the character of the individual borrower?
Being discreet, genuine, honest and prudent
What can impact a borrower's debt service capacity?
Changes in their financial standing
In the context of consumer lending, what does the character of the individual borrower refer to?
Integrity, sense of responsibility and behaviour
Which of the following is a characteristic of a borrower with a negative attitude towards debt repayment?
Shirking debt repayment obligations
What is the relationship between a borrower's character and their credit risk?
A borrower's character is one aspect of their credit risk
In the assessment of character, what is a red flag for the lending bank?
A borrower's record of poor behaviour and/or lack of responsibility
How do the characteristics of a well-run company relate to the character of its senior management?
They typify the character and moral strength
What is the character of a business borrower a review of?
The management team as a whole and its relationship with the controlling parties
What is known as organisational discipline and trustworthiness in a business?
Corporate Governance
What is a key aspect of a business's corporate character?
The management team's trustworthiness and discipline
Why is it important to assess the character of a borrower?
To assess the borrower's expertise and vision
What aspect of a borrower's character does their management lifestyle reflect?
Thriftiness
What can arise within an organisation due to different levels of supporting managers?
Conflicts of interest and power struggles
Which of the following borrower attributes is associated with a lower likelihood of default?
Prudent management style
What is an important consideration in assessing a borrower's character?
All of the above
Which aspect of a borrower's character is reflected in their willingness to repay?
Integrity
What does a borrower's marital status indicate about their likelihood of default?
They are less likely to default
What trait is a credit officer likely to assess when examining a loan applicant's character?
Moral obligation to repay debt
What is the primary aim of assessing a loan applicant's character?
To establish creditworthiness
In evaluating a loan applicant's character, what aspect is a credit officer likely to prioritize?
Personal values and integrity
What does a credit officer aim to uncover when assessing a loan applicant's character?
Trustworthiness and reliability
Which of the following is NOT a key aspect of a loan applicant's character?
Industry expertise
What is a key indicator of a company's character in the industry?
Its track record and reputation in the industry
Why is character assessment more personal in consumer lending?
Because it involves individual borrowers
What can a credit officer do to assess a company's character?
Hold personal interviews with the CEO
Why is it important for a company to have a strong character?
To stay competitive in the modern marketplace
What can a lender learn from previous experiences with a borrower?
The borrower's character
Learn about the 5Cs framework of credit assessment, including character, collateral, capacity, condition, and capital. Understand how to evaluate credit risk for individual borrowers and organisations.
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