Loan policies vary from bank to bank depending upon the bank's individual needs. Despite this, loan policies often address many of the same matters. For instance, most policies establish or outline:
Board responsibility to review, ratify, or approve loans.
Standards for loan presentation sheets and credit memoranda.
Guidelines for unsecured loans, including overdrafts and overdraft approval authority.
Guidelines for terms and rates on loans.
Limits on loan-to-value ratios for various types of loans made, including those recommended by the Real Estate Lending Guidelines.
Documentation requirements for the different types of lending.
Guidelines and a review process for real estate evaluations and appraisals.
Requirements for ongoing documentation review and for updating of credit files for administrative completeness.
Charge-off guidelines and collection procedures and responsibilities.
The maximum total loan volume and maximum volume by types of loans.
The normal trade area, or area where the bank does business, for the bank’s lending.
Limitations on concentrations to individual borrowers and their related interests and industries.
Requirements for loan review and grading.
Methodology for determining the adequacy of the allowance for loan and lease losses.
A process for handling exceptions to policies.
The time interval for the board’s periodic review of the loan policy (at least annually) for its adequacy.
Loan pricing guidelines.
Loan participation guidelines.
Limits and guidelines on off-balance sheet exposures.
In general, a loan policy gives lenders guidance about to whom they may lend money, what they may lend and the conditions on which they may lend.
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