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  3. How do banks manage their risk of bad loan?

How do banks manage their risk of bad loan?

admin2011-01-15  27
问题 How do banks manage their risk of bad loan?
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答案(1)Careful examination before the loan is granted. A. The amount of loan: Never more than a quarter of borrower’s own financial assets. Examine the corporate customer’s financial statements of assets and liabilities. B. Purpose of the credit: Whether the credit is most suitable to the borrower’s need. Whether the loan is to be used in illegal activities or speculative purpose. Decline the loan used in highly speculative purpose. C. Repayment of schedule: Examine the possible sources of the income of the borrower. Determine if there will be sufficient cash-flow over the term of the loan. D. Security available: Factors should be taken into account when considering security: a. value; b. types; c. acceptability; d. reliability. (2)Monitor the performance of the loan during the course of the loan. A. Early identification of the wanting signals of potential bad loan: a. poor management; b. unfavorable industry and market conditions; c. economic cycle and political instability; d. unsatisfactory account conduct; e. deteriorating financial position. B. Detecting the criteria for immediate action: a. when repayment of obligations are deteriorating to a stage where a formal demand for payment has been issued to the borrower and such demand has not been complied with; b. there is a "winding-up" order against the borrower; c. a receiver has been appointed to manage the borrower’s affairs; d. a voluntary "winding-up" resolution has been passed by the shareholders of a borrower under Section 228 (1) (c) of the Companies Ordiance; e. the directors have made a statutory declaration under Section 228(1)(a) of the Companies Ordinance that the company is unable to carry oil with its business. (3)Take the remedial actions when the diagnose appeared. A. Restructuring: a. because of a short-term liquidity problem, the borrower can not repay the loan as originally scheduled, the bank can allow more time for the repayment by restructuring the repayment schedule. b. the restructuring ways: extending the repayment period; split the repayment period into several phases; selling of assets. B. Recovery: a. the bank can exercise recovery if all avenues for restructuring have been exhausted. b. the aim of the recovery is to minimize the amount of write-off relating to the loan. c. actions taken: check the security position to secure that proper charges are in place. send out a formal demand for loan repayment and call in guarantees. (4)Take legal action when satisfactory arrangement cannot be made for the recovery.
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