Download 1.06 Describe the nature of retail/business banking processes

1.07 Describe the nature of
retail/business banking processes
Underwriting
Detailed credit analysis preceding the granting of a loan, based on
credit information furnished by the borrower, such as employment
history, salary, and financial statements; publicly available information,
such as the borrower's credit history, which is detailed in a credit
report ; and the lender's evaluation of the borrower's credit needs and
ability to pay . See also
Loan Processing
Entire sequence of steps, from the time a loan application is received
(or a loan offer is accepted) to the time loan is closed, the loan
proceeds are disbursed, and the aggregate amount (principal plus
interest) is placed on the lender's books as an asset.
Collateral Management
The practice of putting up collateral in exchange for a loan has long
been a part of the lending process between businesses. With more
institutions seeking credit, as well as the introduction of newer forms
of technology, the scope of collateral management has grown.
Increased risks in the field of finance have inspired greater
responsibility on the part of borrowers, and it is the aim of the
collateral management to make sure the risks are as low as possible for
the parties involved
Risk-management processes utilized in
retail/business banking
• Credit risk designs a standard credit management process throughout
the Bank. The principles and processes of risk management focus on
the entire process of credit business which covers customer
investigation, loan evaluation, loan review and approval, loan
payment and post-lending monitoring. Internal credit management
models, which includes credit rating, credit line setting, loan
classification and capital allocation are bank-wide measures utilized
throughout the whole process. Furthermore, special organization is
established to supervise the entire process of the credit business.
Risk Management Continued
• Since exposure to credit risk continues to be the leading source of
problems in banks world-wide, banks and their supervisors should be
able to draw useful lessons from past experiences. Banks should now
have a keen awareness of the need to identify, measure, monitor and
control credit risk as well as to determine that they hold adequate
capital against these risks and that they are adequately compensated
for risks incurred
Performance Activity
• Discuss risk-management processes utilized in retail/business
banking.
• Describe efforts to streamline retail/business banking processes.