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CBC > Credit Process > Flashcards

Credit Process Flashcards

1
Q

It is the sequence of events involved in the creation of individual account relationship comprising a risk asset portfolio and the management of these assets to ultimate liquidation or recovery.

A

The Credit Process

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2
Q

What are the 4 process involving credit process risk:

A
  1. Identifying
  2. Measuring
  3. Controlling
  4. Mitigating
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3
Q

The Credit Process:

A
  1. Target Market Definition
  2. Credit Initiation
  3. Credit Evaluation
  4. Credit Risk Rating
  5. Facility Structuring
  6. Credit Approval
  7. Documentation & Release of Exam
  8. Implementation/ Loan Administration
  9. Remedial Management
  10. Acquired Assets
  11. Credit Review System
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4
Q

It is the process of defining/identifying a lending unit’s target markeet.

A

Target Market Definition.

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5
Q

In the process of doing target market definition, this aspect is reviewed annually by Management

A

Target Market Segment

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6
Q

True or False: Target Market Definition is the analysis of industry trend and risk concentration of the bank’s credit portfolio.

A

True

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7
Q

True or False: Marketing efforts focused on the bank’s risk appetite.

A

True

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8
Q

True or False: The importance of minimize wasted efforts as bank resources are utilized on accounts that are within target market.

A

True.

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9
Q

True or False: Latest Industry performance and market developments if carefully evaluated will increase risk exposure to bad accounts.

A

False. If will minimize risk.

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10
Q

If the existing accounts or exposures do not fall within the Bank’s Target Market what would the lending unit may propose?

A
  1. Retain exposure at existing levels
  2. Expand the relationship, if justified
  3. Scale down
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11
Q

It guides lending units in establishing their roadmap and strategies.

A

Target Market Definition

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12
Q

True or False: Target Market Definition objective is to reduce wasted marketing efforts and provides direction for existing exposures.

A

True

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13
Q

Target market definition aims to minimize risk of exposure to potential ___________________

A

Bad Accounts

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14
Q

It is the solicitation and pre-screening process.

A

Credit Initiation

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15
Q

What are the 2 key activities of Credit Initiation:

A
  1. Pre-client (Indirect Checking)
  2. Actual Visit (Direct Checking)
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16
Q

What is the primary objective of credit initiation?

A

KYC

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17
Q

What are the credit initiation pre-client call activities (indirect checking)?

A
  1. Background Check
  2. External Parties
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18
Q

What are the credit initiation client call activities (direct checking)?

A
  1. Mandatory requirement for call
  2. KYC
  3. Documents obtained
  4. Ocular checking
  5. Conducted prior to presentation
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19
Q

What are the Credit Evaluation Tools?

A
  1. FS Analysis
  2. Credit Investigation Report
  3. Appraisal Reports (if collaterized)
  4. Account Profitability Analysis
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20
Q

It’s objective is to assess repayment risk

A

Credit Evaluation

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21
Q

Credit Evaluation is based on 5 Cs of Credit:

A
  1. Character
  2. Capacity
  3. Condition
  4. Capital
  5. Collateral
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22
Q

It is the process of evaluation of data gather from client interviews, client calls/plans visits and assessment of credit reports and other documents.

A

Credit Evaluation

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23
Q

True or False: Identification/ Assessment of major risk and mitigating factors (if any) is part of the Credit Evaluation.

A

True

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24
Q

It is the method of measuring and interpreting historical and future financial capacity of a Borrower

A

Financial Statement Analysis

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25
Q

True or False: Term Loan proposals should be supported by projections for a certain term duration of the loan.

A

False. It should be the entire duration.

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26
Q

What are the different internal CI Reports?

A
  1. LIS
  2. NFIS/ CMAP
  3. DTI Verification
  4. SEC Verification
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27
Q

What are the different external CI Reports

A
  1. Residence Verification
  2. Business Verification
  3. Trade Verification
  4. Lease Verification
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28
Q

Security or collateral serves as fallback source of repayment, a second way-out.

A

Appraisal Reports

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29
Q

It must have established market and supported by sound valuation methodology.

A

Collateral

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30
Q

What are the preferred types of security that offer stable and clearly definable values

A
  1. Deposits
  2. Gov. Bonds & Securities
  3. Real Estate
  4. Machineries/equipment/motor vehicles
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31
Q

are required for all clean accommodations; acceptability of the surety is properly evaluated- at the point of account solicitation, a surety’s assets and liabilities must already be identified.

A

Sureties

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32
Q

True or False: Surety may be waived subject to approval and based on certain criteria.

A

True

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33
Q

Tool that measures over-all profitability of an account

A

Account Profitability Analysis

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34
Q

True or False: Credit Reports serve as the only tool to aid in credit evaluation.

A

False. It is also still the lending officer’s responsibility to do thorough assessment of the borrower.

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35
Q

_____________ serve only as tools made available for use of lending officers and credit approvers in arriving at ____________.

A

Credit Reports; credit decisions

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36
Q

Clean loan is for borrowers found to be _______________.

A

Highly credit-worthy

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37
Q

It is a tool for measuring, monitoring and controlling the quality of the individual credit exposure as well as the total credit portfolio of the Bank

A

Credit Risk Rating

38
Q

What are the credit risk rating systems in place:

A

a.) ICRRS
b.) BCS
c.) Rating of FIs
d.) Sovereign Risk Rating

39
Q

True or False: Rating is conducted upon credit granting, subject to semi annual review.

A

False. Annual review.

40
Q

Ensure terms of credit facility are properly matched with the borrower’s needs and source of repayment to minimize risk.

A

Facility Structuring/ Proposal

41
Q

What are need to consider for Facility Structuring/ Proposal

A
  1. Loan Purpose
  2. Loan Amount, Tenor & Type
42
Q

True or False: Loans granted only in the amount and for the period of time essential for effective completion of the operation to be financed.

A

True

43
Q

Short-term financing

A

Needs require short-term credit facilities.

44
Q

Requires long-term credit facilities; funded by PN beyond one year tenor.

A

Long-term financing needs

45
Q

Proposals to grant credit facility/ies shall be made through the _______________________ which should include salient information, including but not limited the request and its purpose, existing accommodations, background, results of checking, etc.

A

Credit Recommendation Memorandum (CRM)

46
Q

In the facility structuring/ proposal, all proposal should be duly approved by the the appropriate credit as outlined in ____________________, prior to extension of credit.

A

Bank’s Approval Authority Grid or Escalation of Approval Policy

47
Q

Providing credit terms suitable to the borrower’s purpose and source of repayment reduce credit risk.

A

Facility Structuring/ Proposal

48
Q

Proposals for granting credit shall be presented using the ___________________.

A

CRM

49
Q

the deliberation process required for credit granting, as well as for other proposals for amendment of terms and conditions, policy deviations, documentary deficiencies, etc

A

Credit Approval

50
Q

True or False: Recommending lending offers does not necessary need to attest the completeness and accuracy of information in the CRM.

A

False. It must be attested by the recommending lending officer and his/her signature must be affixed in the proposal or attachments.

51
Q

True or False. Approval limits are based on total credit exposure of the borrower.

A

True

52
Q

A Client Group or a group of related accounts is taken as a

A

Single Borrower

53
Q

Relationship is determined based on presence of

A

Controlling Interest

54
Q

True or False: Approvals obtained relieve the originating unit of the responsibility and accountability for the recommended account.

A

False. Does not relieve the originating unit.

55
Q

True or False: Deviations to policy requirements must be disclosed in the CRM and approved.

A

True

56
Q

Credit proposals involving parties related to the Bank like DOSRI and subsidiaries, etc., require what type of approval?

A

Board of Directors Approval

57
Q

Overall responsibility for the account remains with the

A

Originating Unit

58
Q

Related accounts shall be treated as a

A

Single Borrower

59
Q

Process involving the combined efforts of the documentation review units and Legal & Collection Group.

A

Documentation/ Release of Loan

60
Q

handles the collation and facilitates the compliance of documentary requirement

A

Lending Unit

61
Q

provides legal review on the completeness, sufficiency
and enforceability of the documents submitted to them by the Lending Unit; legal opinion and / or drafting of non standard documents; registration and notarial services.

A

Legal and Collection Group

62
Q

validates if appropriate approval has been obtained for the credit proposal, including policy deviations, and checks if required documents have been submitted and properly executed.

A

Document Review Unit

63
Q

Lacking documents must have ______________

A

Approval for deferral or waiver.

64
Q

declares credit facility is operative- whether in part or in full, or subject to conditions– or is inoperative using the

A

Documentation Review Slip (DRS)

65
Q

Release of loan proceeds, as a rule, will be via __________________.

A

Credit to the Borrower’s account

66
Q

ensures that the credit arrangement is properly documented

A

Documentation/ Release of Loan

67
Q

Documentation/ Release of Loan is the joint undertaking of what Unit and group?

A

Lending Unit along with Legal & Collection Group

68
Q

validation conducted by document review unit to ascertain if credit facility is

A

Operative or Inoperative

69
Q

process where existing loan portfolio is evaluated on a continuing basis, as long as banking relationship exists

A

Implementation/ Loan Administration

70
Q

is primarily responsible for
continuous monitoring and evaluation of the quality
of his/her credit portfolio, and for seeing to it that
credit ratings or classifications are up to date

A

Lending Officer

71
Q

Implementation/ Loan Administration ensures that:

A
  1. Adequate management action
  2. Adequate loss reserves are set up
  3. Adequate provisions for estimated future loss
72
Q

True or False: Interest shall be accrued for Past Due or NPLs accounts; it will be taken up only when actual payments are made

A

False. Interest shall NOT be accrued

73
Q

for credit products to allow borrowers to catch up on their late payment without being considered as past due.

A

Cure Periods. (Max of 30 days)

74
Q

True or False: Past due accounts shall not be granted any additional facility/loan except upon the approval of appropriate authority.

A

True

75
Q

True or False: Account is considered past due when principal and/or interest or instalment due, or portions thereof, are not paid at their contractual due date.

A

True

76
Q

True pr False: Account is considered as non-performing if principal/interest are past due and unpaid for more than 60 days or interest accrued for more than 30 days have been capitalized, refinanced, or delayed by agreement

A

False. Unpaid for 90 days; more than 90 days have been capitalized

77
Q

True or False: In determining whether a loan is considered NPL or not, reference to the pertinent MORB guideline is a must.

A

True

78
Q

existing loan portfolio is evaluated on ___________________ conducted during the term / life of the facility

A

Continuing basis

79
Q

is an opportunity to revisit
the portfolio and review compliance to requirements under the credit facility.

A

Annual Review/ Renewal

80
Q

process where special handling of potential or existing problem accounts is required to avoid or minimize financial losses to the Bank.

A

Remedial Management

81
Q

True or False: When cash collection is not possible, the alternative is asset recovery for eventual conversion back to cash.

A

True

82
Q

It is the voluntary payment of assets.

A

Dacion en pago / dation in payment

83
Q

True or False: Should remedial efforts fail, account may be referred to LCG for appropriate legal action.

A

True

84
Q

Choice of remedial strategy should be based on
circumstances related to the account and should be
that which will result in _______________ for the bank within _____________________.

A

Highest Recovery; Shortest Possible Time

85
Q

Proposals for restructuring require approval by the
Board of Directors, Excom, or Crecom at a limit of:

A

Php 20 Mn.

86
Q

DOSRI and other parties related to the Bank must be approved by

A

Board of the Directors

87
Q

Assets (which may or may not be existing collaterals) may be acquired by the Bank in settlement of loans through foreclosure or dation in payment

A

Acquired Assets

88
Q

process where all credit exposures are periodically reviewed, validated, monitored.

A

Credit Review System

89
Q

Possible Remedial action plans or strategies

A
  1. Collection of Payment
  2. Negotiated Settlement
  3. Work-out (Rescheduling/ Restructuring)
  4. Sale of loan to 3rd parties
90
Q

True or False: Loan restructuring requires approval from either the Board, the Excom, or Crecom

A

True

CBC (7 decks)

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