New Bank Regulations – Six Key Focus Areas That Examiners Will Evaluate

Jun 30, 2014




Regulators have recently turned up the heat on lenders to integrate your business lending processes including origination, underwriting, risk classification, portfolio management and loan workouts. There are six key focus areas that examiners will evaluate:

Origination – Ensure consistent investigation by developing written questionnaires based on loan type specific documentation checklists to be used to guide loan officers in their discussions with perspective customers.

Underwriting – Develop loan type specific written underwriting guidelines outlined with loan policy utilizing integrated documentation checklists to ensure consistent execution and documentation of technical exceptions.

Risk Classification – Develop risk classification methodology to ensure consistent, benchmarked criteria for loan grading that is used at origination and throughout the life of the loan.

Underwriting Format – Develop consistent format content guidelines for loan analysis that incorporates within the narrative specific risk classification rationale consistent with policy definitions.

Portfolio Management – Develop approval authorities and written portfolio management procedures aligned with loan policy and management identified portfolio targets.

Work-out Loan Management – Develop written procedures for Watch List and loan work-out management.

Lending is not risk avoidance, it is risk management.  Having this form of written documentation utilized by skilled staff will demonstrate to examiners your commitment to lending risk management. Strong portfolio management and systematic due diligence is critical in implementing changes to reserve analysis under the Current Estimated Credit Loss (CECL) rules. Critical elements to keep in mind are:

  • Risk Rating Analysis – Ensure that adequate initial risk rating documentation is in place. Evaluate adequacy of current available data and consideration of CECL impact on rating analysis.
  • Documentation and Closing – Ensure that accountability for loan documentation is assigned to responsible individuals. Use checklists to track needed documentation and develop specific collateral valuation and appraisal review guidelines.
  • Loan Servicing – Maintain written procedures for delineation of responsibility and proper separation of duties with ongoing exception tracking.
  • Loan Administration and Review – Ensure third party loan review (internal or external) scope and adequacy. Maintain written procedures for ongoing loan risk evaluation and adversely risk rated loan action plans.


For More information on Bank Regulations, or to speak with Brian, please send an e-mail to or call 585-662-2212.

Post by Kaitlin Alfvin

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