Credit Analysis and Credit Management

Terence M. Yhip and Bijan M. D. Alagheband
Additional contact information
Terence M. Yhip: University of the West Indies
Bijan M. D. Alagheband: McMaster University and Hydro One Networks Inc.

Chapter 1 in The Practice of Lending, 2020, pp 3-46 from Springer

Abstract: Abstract This introductory chapter outlines the processes of originating credit and managing credit. Credit origination involves loan underwriting, assessing the creditworthiness of a borrower, determining a borrower risk rating (BRR), and structuring the loan. Credit administration involves monitoring credit quality, covenants, and loan documentation, and taking actions to avoid loan loss. The chapter introduces the two-dimensional risk-rating system that separates the BRR from the facility risk rating, though they jointly determine the expected loss on a loan. The chapter reviews the traditional “Five Cs” method of credit analysis and its derivative, the criteria-based methodology to assign a BRR. Because a credit rating is essential to lending, loan pricing, and capitalisation, the chapter highlights the adverse effects on risk rating due to information asymmetry.

Keywords: Credit origination; Credit management; Two-dimensional rating system; Borrower risk rating; Facility risk rating; Information asymmetry (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-32197-0_1

Ordering information: This item can be ordered from
http://www.springer.com/9783030321970

DOI: 10.1007/978-3-030-32197-0_1

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().