Exam 16: Lending Policies and Procedures: Managing Credit Risk

______________ loans are ones that carry a strong probability of loss to the bank.

A restriction against a borrower taking on new debt during a loan period is an affirmative covenant in a loan contract.

Financial institutions that disagree with an examiner's classifications of their loans can appeal against these ratings.

Negative covenants require the borrower to take certain actions,such as periodically filing of financial statements and maintaining insurance coverage.

Construction loans by a bank fall under the loan category known as commercial and industrial loans.

Credit card loans are generally more profitable for small and medium-size banks than for the large banks.

The maximum outstanding loans for all FDIC-insured institutions are classified as:

Smaller banks tend to emphasize on _________________ in the form of smaller denomination personal cash loans and home mortgage loans extended to individuals and families as well as smaller business loans.

Commercial and industrial loans are loans to businesses to cover such things as purchasing inventory,paying taxes,and meeting payroll expenses.

____________________________ loans are ones that are extended to farmers and ranchers to assist in planting crops,harvesting crops,and to support the feeding and care of livestock.

First National Bank of Edmond asks a prospective customer for her driver's license.Which of the 6 Cs of lending would this piece of information belong to?

The process of loan review means that a loan committee must generally approve a loan before the borrower is told the loan is approved.

The Third National Bank of Wichita makes a loan so that Tim Bridges can buy 1,000 shares of Coca Cola stock.Which category of loans would this loan fit in best?

A(n)______________ is a written contract signed by a borrower and states the principal amount of the loan,the interest rate on the loan,and the terms under which repayment must take place.

The ______________ is a uniform rating system developed by regulators where banks are given a rating between one and five in each of the six categories and an overall rating.

Disclosure laws require that a borrower be quoted the "true cost" of a loan,as reflected in the:

A bank's _____________________________________ gives its loan officers specific guidelines in making individual loan decisions and in shaping the overall loan portfolio.

________________________ are types of loans where a lender buys equipment or vehicles and rents them to its customers.

Sean Carter has an excellent credit rating.Which of the 6 Cs of lending would this piece of information belong to?

The loan mix of any lending institution depends heavily on the _____________________ that each loan offers compared to all other assets a lending institution can acquire.