Concentrations of Credit Policy
This Concentrations of Credit Policy addresses how a bank, credit union, fintech company, or other type of financial institution prudently identifies, measures, monitors, and controls credit activities through concentrations of credit (loan concentrations) in order to help achieve effective loan portfolio management (LPM). This process helps an organization to understand not only the risk posed by each credit, but also how the risks of individual loans and portfolios are interrelated.
Table of Contents
- Purpose and Contents – Topic 1
- Policy Statement – Topic 2
- Portfolio Diversification and Concentration Overview – Topic 3
- Pools of Transactions – Topic 4
- Identification of Concentrations – Topic 5
- Correlation of Pools – Topic 6
- Stress Testing – Topic 7
- Concentration Risk Mitigation – Topic 8
- Reporting and Monitoring – Topic 9
- Audit Policy – Topic 10
- Staff Training – Topic 11
- Retention of Documentation – Topic 12
Recent updates to this product:
03/18/24 Update
Eliminate and/or modify references to the term “Troubled Debt Restructuring” (TDR) with a “Borrower Experiencing Financial Difficulty.”
01/02/24 Update
FDIC FIL-64-2023 – Advisory: Managing Commercial Real Estate Loan Concentrations in a Challenging Economic Environment
06/01/23 Update
Eliminate references to allowance for lease and loan losses (ALLL) which was replaced by current expected credit losses (CECL).
This Concentrations of Credit Policy (approximately 25 pages) is available to purchase from BankPolicies.com in Microsoft® Word format.
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