Lending money to reliable customers is the lifeblood of every community bank. Not only are loans a dependable source of revenue for financial institutions, but they also play a crucial role in meeting the needs of local communities. Regardless of the type of lending that a bank engages in, there is always an inherent element of risk involved. This is why it is of utmost importance that community banks have an effective and standardized method of identifying, rating and monitoring the amount of credit risk that it assumes through its lending practices.
The managing partners at Artisan Advisors have decades of experience in all aspects of community banking operations, having previously held positions such as president and board member. We are uniquely qualified to provide valuable insight and expert consulting services to C-Suite level executives in the area of credit risk management.
The Credit Risk Policy
A community bank’s credit risk policy is the foundation of successful and profitable lending practices. The credit risk policy will outline the following fundamental elements.
Type of loans to be offered (through Board and regulatory approval
Underwriting criteria (collateral minimums, credit score thresholds etc.)
Terms of loans, such as time horizon and interest rates
The establishment of a risk factor ranking system
Other pertinent information
A strong and effective credit risk policy will keep a community bank’s lending portfolio and underwriting process consistent with the organization’s specific objectives. Artisan Advisors has worked closely with banking executive teams to not only ensure that their credit risk policy is compliant with any applicable regulations, but that it is also designed to encourage business growth, while always minimizing financial risk. In addition to reviewing a community bank’s current credit risk policy, we can also advise on how to improve it and make it more effective. Because every bank’s credit and lending goals are different, we take a tailor-fit approach with every client.
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