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SUCCESS STORY: CREDIT
CLIENT:
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Major Middle Eastern Bank |
DIVISION:
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International |
CONTACT:
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Managing Director |
MAJOR FUNCTIONS:
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Credit Approval and Control |
SITUATION
The credit group was a highly centralized operation that approved
all credits over a nominal amount authorized in the branches.
Overstaffed with credit analysts, the client had no formal
written credit policy or credit procedures. The credit support
Department was engaged in excessive administrative processes in
an attempt to protect the bank against errors or fraud committed
by the branches.
LOBUE RECOMMENDATIONS
- Develop a formal documented credit policy and credit
processing procedures.
- Establish a loan review unit and a workout group.
- Eliminate the credit support unit.
- Assign responsibility for all credit files to the credit
analyst.
- Create a central liabilities function to insure that the
accounting for the credit limits remains accurate.
- Assign responsibility for follow-up on past due accounts and
missing documentation to the branches, with exception reporting
to credit group.
- Combine the credit analysis units.
- Develop management processes to measure and control
activities in the credit group, monitor and analyze the entire
portfolio and evaluate the consumer portion with a view toward
future product development.
REAL RESULTS
- A documented credit policy and procedures manual is in
place. Policies are now consistent and protect the bank from
previously uncovered risk.
- A loan review procedure allows the head office to confirm
compliance with its policies by the branches.
- The newly established workout group allows the bank to
negotiate with clients to repair potentially bad loans before
problems become irreversible.
- The credit policy clearly delineates responsibility, thus
reducing follow-up activity. Communication channels between head
office and the field are streamlined.
- Credit MIS that supports the credit policy is now in place.
- Early warning system identifies and manages potentially bad
customer credits.
- Credit group has an established management process.
Turnaround time on credit decisions has been shortened. The loan
committee will be spending more time on new and significant
business opportunities and less on short-term renewals. The
reengineered operation provides for growth in processing volumes
of 20-30% while reducing staff by 30%.
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