Loan Grading and Review Policy
This Loan Grading and Review Policy addresses the requirements of a bank, credit union, fintech company, or other type of financial institution to assign appropriate loan grades to effectively rate the overall strength of its loan portfolio, and to implement a timely, independent and accurate evaluation and formal loan review process of all loans.
Table of Contents
- Purpose and Contents – Topic 1
- Policy Statement – Topic 2
- Loan Grading Policy Statement
- Loan Review Policy Statement
- Enforcement
- Exceptions to Policy
- Credit Administration and Committee Responsibilities – Topic 3
- Credit Administration
- Directors’ Loan Committee
- Special Assets Committee
- Loan Grading System – Topic 4
- General
- Loan Risk Grade Categories
- Upgrade Procedures
- Downgrade Procedures
- Split Grade Procedures
- Automated Credit Scoring – Topic 5
- General
- Credit Scoring Guidelines and Methodology
- Exceptions to Underwriting Decisions and Override Authority
- Model Documentation
- Model Management and Tracking
- Program Reporting
- Loan Officer Responsibilities – Topic 6
- General
- Supporting Information
- Guarantees and Third Party Support
- Collateral
- Terms and Documentation
- Other Considerations
- Credit File Availability
- Loan Review System – Topic 7
- General
- Objective
- Secondary Review and Credit Denial
- Quality Control and Assurance
- Loan Review Scope
- Depth of Transaction or Portfolio Reviews
- Other Factors and Conditions
- Qualifications of Loan Review Personnel Standards
- Independence of Loan Review Standards
- Frequency of Review Standards
- Review of Findings and Follow-Up Standards
- Communication and Distribution of Results
- Internal Loan Review
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.”
06/01/23 Update
Eliminate references to allowance for lease and loan losses (ALLL) which was replaced by current expected credit losses (CECL).
This Loan Grading and Review Policy (approximately 32 pages) is available to purchase from BankPolicies.com in Microsoft® Word format.
