All financial institutions must have a written policy that establishes the rules and a framework to prudently operate and administer their credit exposure. Writing a credit policy that adequately addresses all activities that create credit risk can be a very daunting task. An effective credit policy establishes the institution’s lending philosophy consistent with its business strategies, and provides clear, concise credit standards and guidelines. However, credit policy cannot address every possible situation and therefore must also be flexible enough to meet the legitimate credit needs of the customers served by the institution.
This slide deck will provide persons responsible for writing all or parts of credit policy with information to achieve those objectives and more. Other topics that will be discussed include best practices for developing or changing policy, minimum required versus additional desired content, differentiating between policy and procedure, using technology to provide access to the policy, using credit policy to educate and inform rather than merely directing the users, important issues to regulators, and ensuring that the policy is appropriate for the complexity and scope of the institution.
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