FDIC Credit Risk Data, Survey

On Jan. 10, FDIC issued report on credit management and loans.

  • Highlighted articles appeared in winter 2017 edition of FDIC supervisory insights.
  • On credit management information systems (MIS); survey of consumer products.
  • How banks can strengthen credit MIS by including forward-looking risk indicators.
  • Establishing sound governance to effectively administer MIS/credit risk oversight.
  • Forward Looking Credit Approach
  • Instead of only backward-looking data, analysis should accurately predict new risk.
  • Good MIS has loan-related data to develop timely, meaningful management report.
  • Lagging indicators - loan delinquencies, charge-offs, measures of current portfolio
    performance, are important and reviewed MIS systems typically do a good job on.
  • For 24 reviewed banks, MIS systems were not good on forward-looking indicators.
  • Data Tools to Improve
  • MIS reports must be reviewed in accordance with underwriting policies, exceptions.
  • To perform a strategic assessment, not merely growth numbers, specific for assets.
  • For commercial loans, have portfolio stratification, using loan-to-value (LTV) ratios.
  • On real-estate loans, use debt service coverage ratio (DSCR), loan grade migration.
  • Included a table of data, for different types of loans, loan products for MIS system.
  • Governance of MIS
  • Board and management should receive timely, meaningful, and accurate reporting.
  • In format clearly identifying risks to be considered by them, for strategic decisions.
  • Documentation to support process, metrics, analysis should be detailed not general.
  • Must be timely, enough provided to board for review, tailored for specific audience.
  • Trend analysis, no over-reliance on average, preserve data integrity, safety crucial.
  • Consumer Lending Article
  • Second article summarizes consumer loan survey, focus on underwriting standards.
  • Suggested that credit and liquidity risks are increasing, associated with loan growth.
  • Cited out-of area lending, fast growth institutions credit and funding concentrations.

Regulators FDIC
Entity Types Bank; BHC; Depo
Reference Rp 14-2, FIL-5-2018, PR, 1/10/2018
Functions Compliance; C-Suite; Exams; Financial; Operations; Reporting; Risk; Treasury
Countries United States of America
Products Banking; Loan; Mortgage; Overdrafts
Regions Am
Rule Type Guidance
Rule Date 1/10/2018
Effective Date 1/10/2018
Rule Id 37371
Linked to N/A
Report Issue 1/15/2018
Report Section US Banking

Last substantive update on 01/10/2018