|3. Harvard Westerman Loan|
|What you need to know||Join the Meeting||Review the Reports||The board's response|
|Watch the Video||Common Elements of Policies||Policy Exceptions||Creating An Effective Policy||Practice|
As with other bank matters, the board of directors is responsible for establishing the bank’s loan policy. It is important that you are familiar with the purpose and basic components of loan policy as a key credit risk control tool. In addition, you should be able to judge whether a loan policy is adequate for ensuring good asset quality at your bank.
Although policies should be tailored to a bank’s individual needs, they tend to contain certain common elements. Loan policies almost always include an objective statement describing what is to be accomplished. For example, the basic objectives of the loan policy are for the bank to:
Policies may also include provisions that address questions of "Who," "What" and "When" which directly relate to the lending function.
“Who” refers to the board, loan committee, senior lending officer and other lending officers and their lending authority.
“What” pertains to the considerations in making a loan:
“When” refers to time frames for completing actions covered by loan policy.
To compare some of your policy elements with those at other small banks, review the Common Practices at Small Banks.
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