credit standards (1)

credit standards convert the culture into action .They must take account of the nature of the bank is business , its structure and the quality and training of staff involved in credit decisions.
standards include factors such as :
- the depth of analysis and how far this is adapted to the needs of the borrower. There is a trade off to be made between a wish to understand all aspects of a proposition and cost ;
- how far facilities are to be standardized and how far they are to be tailored to customers individual needs;
- structuring facilities to protect the bank which should be done in a way that as far as possible also benefits the customer .A repayment schedule for a term loan should match customer cash flow ,not Just meet some predetermined arbitrary benchmark;
- recognizing how far customer sensibilities are going to be balanced against the bank is need to protect itself against loss. for example ,when a customer is resistance to giving or improving security , or providing information is going to be allowed;
- education of customer and the capacity to be able to explain decisions .A banker who can only defend a particular decision by reference to head office rules is hardly an impressive professional;
- the inclusion of a proper degree of monitoring and control . The point of monitoring is to identify deterioration as soon as possible and to take constructive remedial action . its effectiveness depends not only on the ability to spot adeterioration ,but also the quality of the reaction. It is as important to avoid a panic reaction as a complacent one.