Fundamentals of Credit Risk Management – Quiz 02

Last Updated: June 2024

Table of Contents

Topics:

Chapter 3:
Explain how financial institutions mitigate credit risk by taking good security.
– Examine the appropriate use of security in the loan agreement.
– Understand how security is taken.
– Explain the challenges of security.

• Lessons learnt from taking inappropriate security
• How to take security/processes involved
• The challenges of security – laws, regulations, guarantees, contingent liabilities and covenants

Chapter 4:
Describe the credit risk life-cycle and how it is managed.
– Explain how credit risk is managed.
– Explain the use of credit information.

• General outline of credit risk in banking.
• Credit risk policies.
• Credit risk assessment
• Risk based pricing, internal rating and rating migration.
• Due-diligence and conduct risk – avoiding mis-selling.
• Due process – documentation and avoiding legal mistakes.
• Credit risk reporting.
• Managing credit risk at a portfolio level.
• Basic portfolio analysis.
• Concentration risk, contagion risk and how they are managed – securitization and diversification.
• External factors which affect credit risk – political, economic, environmental.
• The concepts of credit reporting
• The structure and contents of credit reports

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