This excerpt from the RMA Credit Risk Council's “2017 Industry Insights: Perspectives from the Front Line” talks about the risks of lending to non-depository financial institutions. Those credit risks can be substantial and can arise from various factors.
This excerpt from RMA's Credit Risk Council's “2017 Industry Insights: Perspectives from the Front Line” talks about the challenges ahead and provides 8 tips on how risk managers can navigate today's banking environment.
As this credit cycle continues, maintaining perspective and holding the line have become increasingly difficult for risk managers. This excerpt from the RMA Credit Risk Council’s “2017 Industry Insights: Perspectives from the Front Line,” offers several insights into how risk managers can strike the right balance.
Credit Risk Certified (CRC) is the premier designation for the commercial credit risk professional. This credential distinguishes the certification holder from all others in the field. It validates your credit risk skills and establishes your exemplary achievement as a Credit Risk Certified recipient. Earning your CRC demonstrates that you recognize the industry’s best credit practices. Learn more about Credit Risk Certification from The Risk Management Association.
Financial services face both physical and transitional risks regarding climate change. No matter what you believe to be true about climate science, the reality is that your bank must address it.
It is important to consider the emerging risks surrounding commercial lending and commercial real estate lending. What stage are we in of this current economic cycle? The answer is uncertain, but it is important to consider the emerging risks surrounding commercial lending and CRE lending.
How has the risk manager evolved to meet the needs of the banking industry? This slide deck takes a look at how the position has evolved and what skills should you anticipate needing in the future to compose the skill profile of the next decade’s agile risk manager.
This excerpt from RMA's Credit Risk Council's “2017 Industry Insights: Perspectives from the Front Line” talks about the challenges ahead and provides 8 tips on how risk managers can navigate today's banking environment.
As this credit cycle continues, maintaining perspective and holding the line have become increasingly difficult for risk managers. This excerpt from the RMA Credit Risk Council’s “2017 Industry Insights: Perspectives from the Front Line,” offers several insights into how risk managers can strike the right balance.
Credit Risk Certified (CRC) is the premier designation for the commercial credit risk professional. This credential distinguishes the certification holder from all others in the field. It validates your credit risk skills and establishes your exemplary achievement as a Credit Risk Certified recipient. Earning your CRC demonstrates that you recognize the industry’s best credit practices. Learn more about Credit Risk Certification from The Risk Management Association.
Financial services face both physical and transitional risks regarding climate change. No matter what you believe to be true about climate science, the reality is that your bank must address it.
It is important to consider the emerging risks surrounding commercial lending and commercial real estate lending. What stage are we in of this current economic cycle? The answer is uncertain, but it is important to consider the emerging risks surrounding commercial lending and CRE lending.
How has the risk manager evolved to meet the needs of the banking industry? This slide deck takes a look at how the position has evolved and what skills should you anticipate needing in the future to compose the skill profile of the next decade’s agile risk manager.
Heading into 2020, The Risk Management Association is focusing on eight risks. Learn about the top risks the financial services industry faces and how you can address them.
Before the financial crisis, the primary role of the bank underwriter was to make good decisions in deploying the bank’s resources to help loan applicants achieve their goals. Learn how this role in changing in the industry.
Appraisals continue to be a very important and required valuation tool for both owner-occupied and investor real estate transactions. This excerpt from the RMA Credit Risk Council’s “2017 Industry Insights: Perspectives from the Front Line,” talks about three appraisal issues that could make or break a loan.
Instilling the Right Credit Risk CultureLibby Bierman
As the Comptroller's Handbook states, "a bank’s first defense against excessive credit risk is the initial credit-granting process, sound underwriting standards, an efficient, balanced approval process, and a competent lending staff." The start of a new year is the perfect time to review and improve your credit risk culture.
Garrett Morris, director of consulting at Sageworks, discussed the key elements of a strong credit risk culture, including:
-Three Ps of credit analysis
-Five Cs of credit
-Five Cs of data collection
-12 questions to ask at your institution
Potential misconduct fines are now one of banking’s biggest risks. But now that it can be a large part of operational risk—sometimes, in and of itself, ranking alongside credit and market risk—it’s time to start measuring it. Read this to find out how.
How to Instill Ethics in Commercial Lending: Understanding Due DiligenceColleen Beck-Domanico
In order to avoid taking on dangerous loans, your approval staff must be thorough and detailed in their analysis of potential relationships. Due diligence is the process of gathering information needed to analyze a borrower's creditworthiness. This presentation provides an overview of the due diligence process, plus tips to ensure that the process is ethical.
How often have you wondered, “what else can go wrong and how are all the risks interconnected?” Developing a risk governance program, a stress testing and scenario analysis program, as well as a risk appetite statement, can help you build an effective, proactive risk management strategy and enhance the risk culture of your institution.
RMA's Risk Appetite Workbook is a practical guide to understanding and developing a risk appetite statement that is appropriate for your bank. Also available are workbooks on Scenario Analysis & Stress Testing for Community Banks, and Governance & Policies.
Assessing a bank’s culture is not an easy task, but there clearly is an increased emphasis on culture that is part of the regulators' broader focus on “heightened standards.” Learn what it takes to have a strong credit culture. Read about these 10 credit culture factors to assess your institution's credit culture.
Most organizations have multiple project going on concurrently. They need a framework that allows them to evaluate (and mitigate) project risk in a way that reflects the potential business impact of this portfolio of projects.
Future lending strategies will need to account for CRE risks that result from both an expanding economy and recession. View the 5 biggest CRE challenges according to the “2017 Industry Insights: Perspectives from the Front Line” by RMA’s Credit Risk Council
Internal relationships between credit officers and lenders can be just as contentious as the relationship between King Kong and Godzilla. Optimize your banks’ credit process; get 20 tips to ensure effective relationships between credit officers and lenders.
A new emphasis on enterprise risk management from regulators has heightened awareness among bankers to get educated and adopt these best practices at their institution. In response to this increased focus, the RMA ERM Council developed the ERM framework and associated competencies, which became the foundation for a series of highly practical workbooks for implementing effective ERM.
Home equity lines of credits (HELOCs) have distinct risks due to their product structure. Learn about the risks you should be aware of during the HELOC final draw periods. This information is part of the RMA Credit Risk Council's Industry Insights.
Ensuring capital availability for entrepreneurs is consistently referred to by business owners as one of the key components of any successful banking relationship. If you lend to small businesses, you should know about the competitive landscape, including alternative lenders, and the 5 regulatory items you should monitor closely.
Heading into 2020, The Risk Management Association is focusing on eight risks. Learn about the top risks the financial services industry faces and how you can address them.
Before the financial crisis, the primary role of the bank underwriter was to make good decisions in deploying the bank’s resources to help loan applicants achieve their goals. Learn how this role in changing in the industry.
Appraisals continue to be a very important and required valuation tool for both owner-occupied and investor real estate transactions. This excerpt from the RMA Credit Risk Council’s “2017 Industry Insights: Perspectives from the Front Line,” talks about three appraisal issues that could make or break a loan.
Instilling the Right Credit Risk CultureLibby Bierman
As the Comptroller's Handbook states, "a bank’s first defense against excessive credit risk is the initial credit-granting process, sound underwriting standards, an efficient, balanced approval process, and a competent lending staff." The start of a new year is the perfect time to review and improve your credit risk culture.
Garrett Morris, director of consulting at Sageworks, discussed the key elements of a strong credit risk culture, including:
-Three Ps of credit analysis
-Five Cs of credit
-Five Cs of data collection
-12 questions to ask at your institution
Potential misconduct fines are now one of banking’s biggest risks. But now that it can be a large part of operational risk—sometimes, in and of itself, ranking alongside credit and market risk—it’s time to start measuring it. Read this to find out how.
How to Instill Ethics in Commercial Lending: Understanding Due DiligenceColleen Beck-Domanico
In order to avoid taking on dangerous loans, your approval staff must be thorough and detailed in their analysis of potential relationships. Due diligence is the process of gathering information needed to analyze a borrower's creditworthiness. This presentation provides an overview of the due diligence process, plus tips to ensure that the process is ethical.
How often have you wondered, “what else can go wrong and how are all the risks interconnected?” Developing a risk governance program, a stress testing and scenario analysis program, as well as a risk appetite statement, can help you build an effective, proactive risk management strategy and enhance the risk culture of your institution.
RMA's Risk Appetite Workbook is a practical guide to understanding and developing a risk appetite statement that is appropriate for your bank. Also available are workbooks on Scenario Analysis & Stress Testing for Community Banks, and Governance & Policies.
Assessing a bank’s culture is not an easy task, but there clearly is an increased emphasis on culture that is part of the regulators' broader focus on “heightened standards.” Learn what it takes to have a strong credit culture. Read about these 10 credit culture factors to assess your institution's credit culture.
Most organizations have multiple project going on concurrently. They need a framework that allows them to evaluate (and mitigate) project risk in a way that reflects the potential business impact of this portfolio of projects.
Future lending strategies will need to account for CRE risks that result from both an expanding economy and recession. View the 5 biggest CRE challenges according to the “2017 Industry Insights: Perspectives from the Front Line” by RMA’s Credit Risk Council
Internal relationships between credit officers and lenders can be just as contentious as the relationship between King Kong and Godzilla. Optimize your banks’ credit process; get 20 tips to ensure effective relationships between credit officers and lenders.
A new emphasis on enterprise risk management from regulators has heightened awareness among bankers to get educated and adopt these best practices at their institution. In response to this increased focus, the RMA ERM Council developed the ERM framework and associated competencies, which became the foundation for a series of highly practical workbooks for implementing effective ERM.
Home equity lines of credits (HELOCs) have distinct risks due to their product structure. Learn about the risks you should be aware of during the HELOC final draw periods. This information is part of the RMA Credit Risk Council's Industry Insights.
Ensuring capital availability for entrepreneurs is consistently referred to by business owners as one of the key components of any successful banking relationship. If you lend to small businesses, you should know about the competitive landscape, including alternative lenders, and the 5 regulatory items you should monitor closely.
Safeguard your lending program by learning about the 8 steps of credit risk management. Learn about nonfinancial risks, structuring the loan, and more.
What You Really Need to Know about Commercial Real Estate UnderwritingColleen Beck-Domanico
Prudent real estate underwriting uses quantitative analysis. However, real estate math isn't just a black‐and‐white exercise, nor is it simple formula lending. Many qualitative judgments feed into your estimates of property cash flow, coverage, and value that come from quantitative analysis. Your analysis should be completed in the context of the qualitative credit risk assessment. Doing so will avoid over‐advancing on potentially weak property cash flow streams that will jeopardize repayment prospects and bank portfolio quality. This presentation looks at quantitative analysis and integrating qualitative factors; underwriting guidelines; regulatory guidance; and value and cash flow analyses.
The RMA Credit Risk Council’s 2016 Industry Insights discusses the rise of aggressive indirect auto underwriting and actions you can take now to lower your risks.
Banks hold as much as 33% of the overall multi-family debt in this country. Learn how to survive the inevitable slowdown. Get seven tips on measure you can take to prepare for a multi-family housing crisis.
The Talent Gap: Three Processes Bankers Must Embrace to Safeguard Risk Manage...Colleen Beck-Domanico
Describes employment trends in banking and the three essential processes bankers should follow to ensure future risk management continuity in their banks.
Are you prepared to manage the current challenges, risks, and complexities related to vendor risk management in the financial industry? In summer 2014, in association with MetricStream, RMA conducted the Third-Party Vendor Risk Management Survey. This presentation brings you the highlights of the survey and some sound advice to manage your third- and fourth-party suppliers.
How to Stack Your Bank’s Portfolio with More Winners and Fewer LosersColleen Beck-Domanico
How does an industry affect a company and its repayment risks? To find out, read this slide deck and learn about Porter's five forces, a sixth force that comes into play, the business cycle, and the impact of the business cycle on a company.
Portfolios with excessive concentrations of credit are more challenged to withstand a downturn. Planning now allows time to make adjustments to portfolios in order to be able to weather the next financial crisis. Learn how to prepare.
Risk management is an integral part of business management. This set of principles was developed by the industry for the industry. They have been drafted to make them so practical that they will resonate with any financial organization.
Many community banks have concerns over the implementation of the CECL standard. Learn about the concerns bankers have and the five actions you should take today.
Credit data management and governance remains one of the critical challenges facing risk managers. This excerpt from the RMA Credit Risk Council’s “2017 Industry Insights: Perspectives from the Front Line,” offers several insights into data governance.
Credit Considerations for the 5 Most-Researched Industries on eStatement StudiesColleen Beck-Domanico
Learn about the credit risk issues for the top 5 industries researched on eStatement Studies. Examine the advantages and risks of lending to 5 industries and gain insight into their funding needs.
Similar to The Rise and Risks of Lending to Non-Depository Financial Institutions (20)
Online learning is more important than ever, especially during the Covid-19 pandemic. Online training gives learners the ability to work around their schedules, putting them in control. It’s cost-effective and easily accessible. View this slide deck to learn what to look for in a good online training provider.
What is Blockchain and How Can It Change the Game for Financial Institutions?Colleen Beck-Domanico
Blockchain has grown in popularity for a variety of applications. Learn about the benefits and risks of incorporating this technology into your payments space
The new Bank Secrecy Act (BSA) rule codifies existing regulatory expectations regarding customer due diligence and imposes a new requirement on covered financial institutions. Learn about the new requirement to identify and verify the natural persons behind institutions’ legal entity customers.
As of January 1, 2018, lenders subject to the reporting requirements of the Home Mortgage Disclosure Act were required to begin reporting specific new information in accordance with the Consumer Financial Protection Bureau’s final rule issued in October 2015. Find out what you need to know in the areas of data collection, compliance tool and assistance, ethnicity and race data, Regulation B, privacy issues, and best practices
Get Credit risk considerations, including advantages, risks, funding needs, and more, for the three most-researched hospitality industries on RMA’s eStatement Studies. Industries are Hotels (except Casino Hotels) and Motels, Full-Service Restaurants, and Limited-Service Restaurants (Fast Food).
How to Make Your Specialty Services Lending Rock: Credit Considerations for 4...Colleen Beck-Domanico
Make better specialty services lending decisions. This slide deck discusses credit risk considerations for the four most-researched specialty services industries—dental practices, physician practices, HVAC, and new car dealers—on eStatement Studies.
This slide deck discusses real estate lending credit considerations including advantages, risks, funding needs, and more for the three most-researched real estate industries on RMA's eStatement Studies.
Get 7 tips from the RMA Credit Risk Council's "2016 Industry Insights" on how to prepare for the implementation of the Current Estimated Credit Loss (CECL), which is expected to be in force in 2019. Learn what you should be doing now to prepare.
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just what'sapp this number below. I sold about 3000 pi coins to him and he paid me immediately.
+12349014282
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the what's app number of my personal pi vendor to trade with.
+12349014282
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
1. Elemental Economics - Introduction to mining.pdfNeal Brewster
After this first you should: Understand the nature of mining; have an awareness of the industry’s boundaries, corporate structure and size; appreciation the complex motivations and objectives of the industries’ various participants; know how mineral reserves are defined and estimated, and how they evolve over time.
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the what'sapp number.
+12349014282
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the what'sapp number of my personal pi merchant who i trade pi with.
Message: +12349014282 VIA Whatsapp.
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
The Rise and Risks of Lending to Non-Depository Financial Institutions
1. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
1
JOIN. ENGAGE. LEAD.
THE RISE AND RISKS OF LENDING
TO NON-DEPOSITORY FINANCIAL
INSTITUTIONS
An Excerpt from “2017 Industry Insights:
Perspectives from the Front Line”
by RMA’s Credit Risk Council
2. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
2
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Private equity
investments in
financial technology
(fintech) firms
exceeded $10
billion across more
than 500
companies.
2016
Nonbank mortgage
lenders accounted
for more than half of
mortgage loans; 6
of the top 10
mortgage lenders
were nonbanks.
Late 2016
In the wealth
management
sector, digital and
automated robo-
advising is growing
and threatening
traditional business
models.
2016
The OCC’s
semiannual Risk
Perspective, states
that loans to non-
depository institutions
were up 150% in
three years,
becoming the fourth
largest commercial
loan category.
Fall 2016
THE RISE OF NON-DEPOSITORY FINANCIAL INSTITUTIONS
3. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
3
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CREDIT FACTORS
Bank Credit
A broad array of
non-depository
financial
institutions use
bank credit:
Includes mortgage,
bus. development,
finance and leasing
companies, RE
investment trusts,
hedge funds,
private equity firms,
nonbank consumer
lenders, and others.
Loan Types
Loan types and
structures vary:
Typically, include
warehouse lines
of credit, revolving
credit facilities,
and capital call
lines.
Secured
Credit
Credit to these
sectors is
generally
secured:
Frequently, with
tightly controlled
and monitored
structures.
Borrowing
Bases
Borrowing bases
are often used:
Tying credit
availability to a
maximum
percentage of the
assets being
financed.
4. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
4
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IMPACT
There is an increasing
importance of nonbanks to all
facets of the financial services
industry, including the
competitive threats they present
to traditional banks.
5. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
5
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IMPACT (CONT.)
While many of these nonbank
sectors provide investing,
partnership, and financing
opportunities for traditional banks,
they also create numerous risks,
including credit risk.
6. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
6
JOIN. ENGAGE. LEAD.
Lending to non-depository
financial institution comes with
credit risks that can be
substantial and can arise from
various factors.
7. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
7
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THE RISK:
ASSET EVALUATION
Failing to properly evaluate asset quality in the borrower’s
portfolio poses risk.
• Example: lending to a finance or business development
company with heavy exposure to highly leveraged
businesses.
• Example: Financing a real estate investment or
mortgage firm with excessive geographic
concentrations in declining markets.
8. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
8
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THE RISK:
AGGRESSIVE UNDERWRITING
Underwriting aggressively and
outside of industry norms can be
problematic.
• Example: using advance rates
that exceed generally accepted
levels or financing asset types that
other banks normally exclude.
9. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
9
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THE RISK:
ASSESSING THE BORROWER
Financing borrowers with very high leverage and little
absolute capital, because you are comfortable with their
track record and cash flow stability can be risky.
• It’s critical to understand the ability of such borrowers to
operate under stressed conditions.
Using looser credit structures for borrowers who appear to
be well capitalized when their underlying portfolios are
highly risky and subject to large losses can cause
repayment problems.
10. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
10
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THE RISK:
ASSESSING OPERATIONAL CONTROLS
You should properly assess the
operational controls of
borrowers and their ability to
manage complex portfolios and
business models.
• How good is the borrower’s own
credit reporting and how well
does it monitor its clients?
• Does the borrower track and
share early warning indicators?
11. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
11
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THE RISK:
ASSESSING THE INVESTORS
You must properly assess the quality
and quantity of investors when
providing capital call facilities backed
by committed capital.
12. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
12
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THE RISK:
UNDERSTANDING THE BORROWER
You should understand the
borrower’s own credit policies,
underwriting standards, and
exception trends.
13. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
13
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THE RISK:
COLLATERAL VALUES
In secured facilities,
overestimating collateral values
and not adjusting advance rates to
market conditions is risky.
14. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
14
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THE RISK:
CONCENTRATION RISK
You must recognize and/or
structure around significant
concentration risk in the
borrower’s business, which could
be any combination of single
obligor, sector, geographic, or
asset type.
15. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
15
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THE RISK:
REPUTATION RISK
If the borrower is financing risky clients, this
could create reputation risk for the bank
involved, particularly in a workout situation.
It’s important to understand the sectors and
specific clients being financed.
A good rule of thumb is if a bank would not lend
directly to the end borrowers, then it should think
twice about lending to the entity directly.
16. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
16
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CREDIT RISK FACTORS
The list of risk factors outlines some of the principle risks
and demonstrates that successful lending to this broad sector requires:
Industry
knowledge
Effective
underwriting
standards.
Significant due
diligence
Ongoing
monitoring.
There are undoubtedly other credit risks not indicated in this presentation.
17. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
17
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CREDIT RISK FACTORS (CONT.)
Consistent with broader trends during
recent years, banks have enjoyed strong
credit quality in these sectors, but that could
change, and understanding these key credit
risks is important to any institution with
exposure to these industries.
18. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
18
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The Credit Risk Council supports
professionals who are responsible for
establishing, maintaining, or carrying
out credit risk management policies.
The council focuses on funded and
off-balance-sheet risk management,
including capital markets activity, and
other forms of credit intermediation
and risk mitigation.
ABOUT RMA’S CREDIT RISK COUNCIL
19. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
19
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For additional information about
credit risk management,
visit
www.rmahq.org/credit-risk/
LEARN MORE
20. Enterprise Risk · Credit Risk · Market Risk · Operational Risk · Regulatory Compliance · Securities Lending
20
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Share This Presentation
Visit http://www.rmahq.org for information on risk management.
RMA is a member-driven professional association whose sole
purpose is to advance sound risk principles in the financial services
industry.
RMA helps its members use sound risk principles to improve
institutional performance and financial stability, and enhance the risk
competency of individuals through information, education, peer
sharing, and networking.
Become a member today.