Ian McIsaac

Credit Skills in Private Banking

This course will provide an understanding of the principles and practice of credit analysis in the private banking sector together with a comprehensive methodology to assess the key risk factors.

Course Dates

Introduction

• The need for credit skills
• The nature of credit risk in private banking
• Credit culture
• Introduction to the risk appraisal framework

Credit Policy

• What should an effective credit policy seek to achieve?
• Asset classes and volatility
• Security, leverage and loan to value ratios
• Types of transactions
• Exposure limits

Pricing and the Bank's Capital

• Risk and reward: to what risks does this type of lending activity expose the lender?
• Types of capital - an examination of a bank's balance sheet, and the factors behind availability of capital.
• Cost of capital - how the blended cost is achieved
• The risk-adjusted return on capital (RAROC)
• Internal risk ratings, and how much reliance may be placed upon them

Lending Principles

• The framework of analysis
• The Three Cs: character, capital and capacity
• Other frameworks: CAMPARI and IPARTS

Know Your Customer

• Character
• Information gathering
• Checklist and aides memoires
• Personal interviews
• Case studies/role play, which may be recorded for subsequent review

Structuring

• Borrower, purpose, amount, repayment and terms
• Purpose of security as safety net
• Categories of security and their volatilities
• Some leading indicators on the likely trend of security valuations
• Legal terms: charge, lien, pledge etc, and their significance to a lender
• Guarantees and comfort letters
• Case exercises: security issues

Documentation

• Contents of loan agreements
• Covenants
• Security documentation
• Enforceability and other legal issues