Ch08 - Credit Lending Decision

1. What are the three main principles applied to corporate lending proposal
- Safety
- Suitability
- Profitability
- Do not forget to always have “ ways out: in nay loan that is approved
2. The five Cs is one method of structuring a loan approval process. What
fundamental piece of information does it ignore or fail to highlight?
- The purpose of the loan is not implicitly discussed or demanded
3. What are the three components of a corporate loan?
- Origination
- Funding
- Managing
4. Do you think that an understanding of the three components noted in
question 3 would allow for a correct segmentation of loan duties and
functions within a financial institution?
- Allows for the segmentation of duties into the stated functions
- Allows for limited training to be effective across functions
- Synergy can be applied to management practices as centralisation can occur
- Corporate governance is strengthened because there is less potential to
manage the whole loan process and potential for fraud is lessened
- The audit process can be strengthened because of the separation of
responsibilities and duties
5. In recommending approval of a loan, how does a loan officer
reconcile the needs of the borrower with the bank’s objective of making
a profit?

6. Discuss the veracity and value of the lending cycle.

7. 7. An evaluation of the worth of the three ways out of a loan may lead to a
modification of the
8. loan approval process. What changes may occur? What additional
information may be needed?
9. 8. Attempt to overlay the five Cs and PARSER on the formalized
lending cycle shown in
10. figure 8.1.
11. 9. Refer to the lending products listed in this chapter to meet the needs of
corporates. Are any
12. of them practical to offer as a replacement for a large corporate’s
interaction in the direct market?
13. 10. Should a loan officer be involved in the cross-selling of various
institutional products or
14. should this be the function of other parties employed by the financial
institution? In your
15. discussion, define and develop what is meant by a ‘full relationship with
the client’
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