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Bank Loan Underwriting Practices: Can Examiners’ Risk Assessments Contribute to Early-Warning Systems?



 
Table 1. Survey Responses for General Underwriting Practices
  1/96 - 9/9810/98 - 12/01
QuestionResponses (1996-1998 / 1998-2001)NumberPercentNumberPercent
How would you characterize the potential risk associated with the institution's current UW practices?Below Average/Low74528.92,69161.7
Average/Medium1,56560.81,47533.8
Above Average/High26410.31964.5
 
How would you characterize the potential credit risk of the institution's overall loan portfolio?Below Average/Low92535.92,72262.4
Average/Medium1,36252.91,43332.9
Above Average/High28811.22074.7
 
To what extent has recent lending been made in amounts that resulted in--or contributed to--concentrations of credit to one borrower or industry?Never or Infrequently2,05579.83,38277.5
Frequently Enough to Warrant Notice33913.266015.1
Commonly or as Standard Procedure1817.03207.3
 
How would you characterize the risk associated with loan administration?Below Average/Low82832.22,64460.6
Average/Medium1,38953.91,46733.6
Above Average/High35813.92515.8
 
To what degree does the institution fail to adjust its loan pricing on different-quality loans to reflect differences in risk?Never or Infrequently1,82871.03,80987.3
Frequently Enough to Warrant Notice61123.745310.4
Commonly or as Standard Procedure1365.31002.3
 
To what extent does the institution fail to require a material principal before renewing term loans?Never or Infrequently1,58961.73,30875.8
Frequently Enough to Warrant Notice84232.791320.9
Commonly or as Standard Procedure1445.61413.2
 
To what extent do the institution's written lending policies differ from actual practices?Never or Infrequently1,86372.33,29775.6
Frequently Enough to Warrant Notice60323.490920.8
Commonly or as Standard Procedure1094.21563.6

Last Updated 01/13/2004 Questions, Suggestions & Requests