39 Questions
What is the role of a Credit Officer in the lending process?
Assessing credit risk and making a recommendation on loan applications
What is the responsibility of the Credit Authority in the lending process?
Approving or rejecting loan applications
Who is responsible for drawing up loan documentation based on approved terms?
Officer in Charge of Documentation
What is the primary responsibility of a Loan Administration Officer?
Disbursing loans according to policies
What is the purpose of separating roles in the lending process?
To minimize risks of fraud
How does the repayment phase impact the success of a loan?
'Regular' repayment can indicate loan success
What happens if all repayment obligations are not met within the specified time period?
'Irregular' settlement of the loan occurs
What factor will decide the success of a loan according to the text?
The repayment phase outcome
What action does the authorised loan documentation officer take upon completion of all necessary documentation steps?
Issues a security compliance certificate to the loan administration department
When does Loan Administration typically place the facilities at the borrower's disposal?
After keying in the limits into the transaction processing system
What is one reason for ensuring a separation of duties and responsibilities among different officers in a lending institution?
To provide independent checks and controls
What is the importance of maintaining complete legal documentation by the lender?
Useful in case legal issues arise in the future
Who is responsible for advising on general legal matters related to law and banking operations within a lending institution?
The lending institution's legal department
What role do professional lawyers typically play in the lending institution's operations?
Drafting legal agreements and filing documents
What should be continued after the disbursement of a loan according to the text?
Monitoring Loan Performance
What is NOT a responsibility mentioned for the officer in charge of legal/security documentation?
Keying in limits into the transaction processing system
What does risk management not involve?
Risk indifference
Who are some of the stakeholders in a financial institution mentioned in the text?
Depositors and shareholders
What is the role of 'credit culture' within a financial institution?
To protect the organization from poor quality loan assets
Why is it important for the credit culture to be shared by all bank staff?
To ensure alignment in values and practices throughout the organization
How does a strong credit culture influence external stakeholders?
By fostering confidence among depositors and investors
How is the credit culture initially articulated?
(N) Through discussions and acceptance by directors and stakeholders
'Credit culture' within a bank is primarily aimed at:
(N) Guiding business strategies and administrative actions
'Credit culture' helps in bringing pride among its credit officers by:
(H) Developing positive recognition from the external market environment
What is one of the main challenges credit officers face when making credit decisions?
Obtaining perfect, timely, and accurate information
Why is obtaining accurate information for credit risk assessment considered almost impossible?
The dynamic market environment quickly invalidates current information
What source of information is mentioned as being part of the credit risk assessment process?
Industry peers
How does the lack of complete information impact credit decisions?
It introduces uncertainty and challenges in the decision-making process
Why must credit officers try to obtain the most current and accurate available information?
Because accurate information is crucial for decision-making
What role do external credit reports like CCRIS and FIS play in credit risk assessment?
They are important sources of information for credit officers
How does intentional withholding of adverse information by borrowers impact the credit assessment process?
It can adversely affect the borrower’s creditworthiness evaluation
Why should credit officers be discerning when mining various sources for information?
To ensure they obtain accurate and relevant data for decision-making
What is one of the key pieces of information that a credit officer must establish about a borrower's background?
Location of the borrower's business
Why is capturing details of the applicant in a formal loan application important?
For legal and other future purposes
What is one risk associated with applicants of dubious background or with insufficient information?
Increased risk to the lender
Why is it essential for a credit officer to obtain details about shareholders and directors of a borrower?
To understand the governance structure and key decision-makers
What should be established regarding the legal status of a borrower as a business organization?
Identity and location
Why is it important for a credit officer to know about parent companies and subsidiaries related to the borrower?
'For gaining insight into potential conflicts of interest or financial support
What should a credit officer consider when evaluating a borrower's commitment to the present and future?
'The business plan and strategic initiatives
Explore the importance of credit risk management in financial institutions and how it impacts various stakeholders. Learn about the concept of 'credit culture' and its significance in guiding good credit practices.
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