Loan committees, consisting of senior executives and experienced financial managers, review loan applications that fall outside the bank’s loan officer’s authority or require special attention. They analyze financial statements, credit statements, and other data to determine the best course of action, assess risk exposure, and ensure regulatory compliance. They also review loan reports and management reports and address legal concerns related to lending.
Banks often have a group of individuals called a loan committee to manage and make decisions on loan applications that fall outside the authority of the bank’s loan officer or require special attention; often such loans are business solicitations. Consisting of senior executives or executives, experienced financial managers, and sometimes outside leaders, the committee will review such requests and relevant data in connection with those requests and determine the best course of action. Ensuring alignment with standard credit policy and assessing risk exposure, the loan committee will determine whether or not to extend such loans. Assuming the standard criteria are in order, risk exposure will often have more to do with economic trends at the time of such loan applications, as well as the general perception of the applicant’s industry. Other responsibilities may include credit review on past due loans and leading collective efforts against past due loans.
As part of the action related to the performance of its functions, the loan committee will review and analyze the financial statements, credit statements and other associated data necessary for proper assistance to loan applications. Review of the bank’s legal loan obligations and lending policy is part of this process to ensure that the loan application meets both criteria. The loan committee may also obtain information related to the applicant’s industry and analyze that information for potential risks inherent in the loan application. Upon review, the committee will vote and, if unanimous, sign the loan for disbursement.
In addition to the primary role of reviewing loan applications and initiating action against overdue or overdue loans, the loan committee often has other important responsibilities as well. Compliance is a major concern for banks, and a lending policy must be in accordance with regulatory authorities. Often the loan committee will conduct periodic reviews to ensure regulatory compliance with bank policy. In addition, the committee will also make sure that all the regulations in prior loan approval and disbursement are followed.
In addition, the lending committee will also review all loan reports and all management reports related to the lending function. Addressing legal concerns related to the lending function is also another concern, and this includes handling all aspects of property involved in bankruptcy and receivership. In addition, the committee will typically conduct a thorough review of all loan-related marketing materials to ensure effectiveness and legal compliance. In general, the committee is responsible for high value lending and for servicing the underwriting, operations, and profitability of the lending function at your financial institution.
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