DUTIES OF CREDIT RISK OFFICERS at IOB

What are the DUTIES OF CREDIT RISK OFFICERS?

A Credit Risk Officer provides analysis and evaluation in order to reduce credit risk for a financial institution. Extracts data from a variety of sources and uses data to build moderately complex financial models that predict risk exposure. Being a Credit Risk Officer prepares performance reports for management.

Overview

Responsibilities

• Review loan requests.
• Assess clients’ financial status.
• Evaluate creditworthiness and risks.
• Contact clients to gather financial data and documentation.
• Analyze risks and approve or reject loan requests.
• Calculate financial ratios (e.g. credit scores and interest rates)
• Set up payment plans.

Frequently Asked Questions

What are the 3 types of credit risk?

Credit Spread Risk: Credit spread risk is typically caused by the changeability between interest rates and the risk-free return rate. Default Risk: When borrowers are unable to make contractual payments, default risk can occur. Downgrade Risk: Risk ratings of issuers can be downgraded, thus resulting in downgrade risk.

What is credit risk examples?

Here are some examples of credit risks: the consumers fail to repay the debt every month they borrow on their credit cards; the households fail to pay the designated amount every month or year for their mortgage loans; the corporations fail to pay back the principal and interest of the bonds they issue to investors.

How banks measure credit risk?

Consumer credit risk can be measured by the five Cs: credit history, capacity to repay, capital, the loan’s conditions, and associated collateral. Consumers posing higher credit risks usually end up paying higher interest rates on loans.

What causes credit risk?

The main cause of credit risk lies in the inappropriate assessment of such risk by the lender. Most of the lenders prefer to give loans to specific borrowers only. This causes credit concentration including lending to a single borrower, a group of related borrowers, a specific industry, or sector.

What are credit risk factors?

Credit risk is the risk of loss that may occur from the failure of any party to abide by the terms and conditions of any financial contract, principally, the failure to make required payments on loans. It is more secure than any other debt, such as subordinated debt due to an entity.

What is credit risk policy?

Credit Risk Policy is the set of formal instructions, typically documented and approved by internal governing bodies, that define in sufficient operational detail an organization’s perception and attitude towards the range or credit risks it faces and desires to manage.

Is credit risk a financial risk?

Credit risk, liquidity risk, asset-backed risk, foreign investment risk, equity risk, and currency risk are all common forms of financial risk.

What is credit life cycle?

These stages are; origination, analysis, approval, disbursement, administration & control and finally recovery (if need be). Only bad loans go into the recovery stage, otherwise the loan life cycle is meant to end with administration & control at which stage full repayment is achieved.

What is credit risk cycle?

The lower the risk and greater profitability to lenders, the more they are willing to extend loans. During high access to credit in the credit cycle, risk is reduced because investments in real estate and businesses are increasing in value; therefore, the repayment ability of corporate borrowers is sound.

What is credit risk life cycle?

The lifecycle of credit risk management is continual. It revolves around the four phases of lead buying, loan originations, account management, and collections – before the process begins again with a new offer to existing customers in good standing completing the loop.

What is the loan origination process?

Loan origination is the process by which a borrower applies for a new loan, and a lender processes that application. Origination generally includes all the steps from taking a loan application up to disbursal of funds (or declining the application). For mortgages, there is a specific mortgage origination process.

How banks determine credit worthiness?

Creditworthiness, typically measured through a credit score (a number between 300 and 900), is an assessment of how likely you are to pay back the loan. Four agencies in India provide their proprietary credit score (and detailed credit reports)—CIBIL, Experian, Equifax, and CRIF HighMark.

How is credit cycle calculated?

It is found by dividing the number of days in a period, in this case, a year, by the receivables turnover for that same time period. The receivables turnover is the ratio of your sales revenue to the amount of invoices that are currently unpaid.

What is expansion of credit?

The expansion of credit by the entire banking system, including the central bank, is the full increase in the money supply, i.e., the increase in demand deposits, plus the increase in currency outside banks (= the increase in earning assets of the entire system).

What is credit risk mitigation?

The term “credit risk mitigation techniques” refers to institutions’ collateral agreements that are used to reduce risk arising from credit positions.

What is credit risk transfer?

Credit Risk Transfer (CRT) transactions are structures that involve the transfer of credit risk of all or a tranche of a portfolio of financial assets. The protection buyer will typically own the portfolio of assets, which may be corporate loans, mortgages, or other assets.