Credit Risk Management Credit Monitorin
Bangladesh Institute of Bank Management
Mirpur, Dhaka.
Compiled by Md. Nurul Haq Majumder Faculty Member
Credit Monitoring
To minimise credit losses, monitoring procedures and systems should be in place that provides an early indication of the deteriorating financial health of a borrower. At a minimum, systems should be in place to report the following exceptions to relevant executives in CRM and RM team:
Past due principal or interest payments, past due trade bills, account excesses, and breach of loan covenants;
Loan terms and conditions are monitored, financial statements are received on a regular basis, and any covenant breaches or exceptions are referred to CRM and the RM team for timely follow-up.
Time corrective action is taken to address findings of any internal, external or regulator inspection/audit.
All borrower relationships/loan facilities are reviewed and approved through the submission of a Credit Application at least annually. Refer to the Credit Application format attached at Appendix 1.2.1.
Computer systems must be able to produce the above information for central/head office as well as local review.
Where automated systems are not available, a manual process should have the capability to produce accurate exception reports.
Exceptions should be followed up on and corrective action taken in a timely manner before the account deteriorates further.
Refer to the Early Alert Process (section 3.3.1), and Appendix 3.3.1.
Early Alert Process
An Early alert Account is one that has risks or potential weaknesses of a material nature requiring monitoring, supervision, or close attention by management.
If these weaknesses are left uncorrected, they may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date with a likely prospect of being downgraded to CG 5 or worse (impaired status), within the next twelve months.
Early identification, prompt reporting and proactive management
Mirpur, Dhaka.
Compiled by Md. Nurul Haq Majumder Faculty Member
Credit Monitoring
To minimise credit losses, monitoring procedures and systems should be in place that provides an early indication of the deteriorating financial health of a borrower. At a minimum, systems should be in place to report the following exceptions to relevant executives in CRM and RM team:
Past due principal or interest payments, past due trade bills, account excesses, and breach of loan covenants;
Loan terms and conditions are monitored, financial statements are received on a regular basis, and any covenant breaches or exceptions are referred to CRM and the RM team for timely follow-up.
Time corrective action is taken to address findings of any internal, external or regulator inspection/audit.
All borrower relationships/loan facilities are reviewed and approved through the submission of a Credit Application at least annually. Refer to the Credit Application format attached at Appendix 1.2.1.
Computer systems must be able to produce the above information for central/head office as well as local review.
Where automated systems are not available, a manual process should have the capability to produce accurate exception reports.
Exceptions should be followed up on and corrective action taken in a timely manner before the account deteriorates further.
Refer to the Early Alert Process (section 3.3.1), and Appendix 3.3.1.
Early Alert Process
An Early alert Account is one that has risks or potential weaknesses of a material nature requiring monitoring, supervision, or close attention by management.
If these weaknesses are left uncorrected, they may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date with a likely prospect of being downgraded to CG 5 or worse (impaired status), within the next twelve months.
Early identification, prompt reporting and proactive management