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.
||Bank; BHC; Depo
||Rp 14-2, FIL-5-2018, PR, 1/10/2018
||Compliance; C-Suite; Exams; Financial; Operations; Reporting; Risk; Treasury
||United States of America
||Banking; Loan; Mortgage; Overdrafts
Last substantive update on 01/10/2018