Risk Management Manual of Examination Policies
Section 17.1 - International Report Pages and Workpapers
|International Loans, Acceptances, and Letters of Credit - Questionnaire
- Are duties and responsibilities for the conduct of international operations clearly defined? Comment briefly.
Yes. The bankís Board of Directors has a written policy statement setting forth the various duties and responsibilities of the operating entities within the international division.
- Does the bank have a definite international lending policy? If "yes", summarize such, state whether it has been approved by the board of directors/trustees, and indicate extent of compliance.
Yes. The subject bankís Board of Directors, in line with the directives of the parent bank, has delineated specific guidelines on clientele to be served, limits on country exposure both in the aggregate and by maturity within those limits and risks to be undertaken. Officers submit recommendations to the international loan committee which has authority to approve loans up to $5 million. Larger loans require senior loan committee approval. In all cases, these policies have been followed.
- (a) Comment upon policy guidelines in effect regarding country risk assets and volume limitations imposed thereon. (b) How often are guidelines reviewed? (c) Does the bank have any country risk concentrations of credit? If "yes", list the country and percentage of such extensions of credit to the bank's total capital and reserves.
(a) Policy calls for all extensions of credit including bank placements, formal loan commitments, and foreign exchange lines to be included within country limits. Claims are reallocated to the country of guarantor or the country where collateral is realizable. Sublimits are provided by maturity of the obligation. Separate limits are provided for in each of the 15 countries where lending is permitted.
(b) Reviewed quarterly.
(c) Yes, Japan 84%, France 40%, Federal Republic of Germany 59%, United Kingdom 39%.
- Are guarantees of other banking institutions and/or parent or affiliated organizations of borrowers required on certain loan obligations? If "yes", under what circumstances and in what form are such guarantees extended?
Yes. Letters of Guarantee from two European banks have been furnished as support to financially weak borrowers. The parent bank has extended guarantees in the form of letters of credit essentially to provide additional protection to the subject bankís position. The parentís guarantee was not relied upon as a primary source for repayment of the loan.
- (a) Describe the general nature and character of collateral pledged, and (b) comment upon the adequacy of supporting documentation.
(a) Collateral includes first preferred ship mortgages, notes and bond obligations of various foreign governments, time deposits, commodities, stocks, and UCC filings.
(b) Supporting documentation appeared in order.
- Is credit information timely in content and available in sufficient readable detail?
Credit information on loans originated at the Nassau Branch continues to be inadequate. Deficiencies include a lack of current and complete financial information on the obligor and guarantor, an absence of thorough credit analysis, and a lack of complete information on country conditions.
- (a) Describe the general nature and types of acceptance financing extended, and (b) the general lines of business involved.
(a) Bank is primarily involved in acceptance financing in connection with international trade activity; several million dollars in dollar exchange acceptances were booked between examinations.
(b) Manufactured goods, commodities, and exchange activities of central banks.
- (a) Describe the general nature and types of letter of credit accommodations offered, and (b) the general lines of business involved.
(a) The bank issues documentary letters of credit to importers, confirms other banksí letters of credit for export customers and, to a limited extent, engages in deferred payment letter of credit financing. Standby letters of credit are undertaken only for prime customers.
(b) Manufacturers, machinery exporters and importers, commodity importers, and foreign governments and agencies.
- Describe the provision for repayment of (a) acceptances, and (b) drafts drawn under letters of credit. Include comment regarding extent of refinancing.
(a&b) Provisions for repayment are arranged prior to issuance and vary as individual conditions warrant. Repayment is generally accomplished by charge to customerís account or by loan accommodation under approved credit lines in the case of acceptances and by charge to the customerís account or acceptance with respect to letters of credit. In certain situations, refinancing is permitted, generally for short periods.