Module 1: Principles of Lending & Credit Management
Key Topics
- Principles of responsible lending
- Role of credit in banking and financial intermediation
- Types of lending institutions
- Consumer, SME and corporate lending
- Secured and unsecured lending
- Short-, medium- and long-term lending
- Credit policies and lending standards
- Risk appetite and lending limits
- Lending ethics and professional conduct
- Credit lifecycle
Practical: Developing a basic institutional lending policy.
Module 2: Loan Origination & Credit Application
Key Topics
- Loan application process
- Customer identification and onboarding
- Purpose of borrowing
- Loan application documentation
- Borrower information requirements
- Credit interviews
- Source and use of funds
- Loan appraisal workflow
- Credit approval authorities
- Exception management
- Responsible lending
- KYC, AML and fraud considerations
The EBA framework specifically emphasizes robust governance and assessment of creditworthiness during loan origination and monitoring.
Practical: Conducting a simulated borrower interview and preparing a loan application.
Module 3: Financial Statement Analysis for Lending
Key Topics
- Understanding financial statements
- Income statement analysis
- Balance-sheet analysis
- Cash-flow analysis
- Working capital
- Profitability analysis
- Liquidity analysis
- Solvency
- Leverage
- Debt-service capacity
- Financial ratios
- Trend and comparative analysis
- Quality of earnings
- Identifying financial weaknesses
Practical: Analysing the financial statements of a prospective borrower.
Module 4: Borrower & Creditworthiness Analysis
Key Topics
- The 5Cs of credit
- Character assessment
- Capacity
- Capital
- Collateral
- Conditions
- Credit history
- Management quality
- Business model analysis
- Industry and sector risk
- Country and macroeconomic risk
- Existing financial commitments
- Cash-flow assessment
- Repayment capacity
International lending standards emphasize obtaining sufficient information to understand the borrower’s risk profile, financial condition, repayment capacity and the purpose and structure of credit.
Module 5: Credit Scoring, Risk Rating & Underwriting
Key Topics
- Credit scoring principles
- Behavioural scoring
- Application scoring
- Internal credit ratings
- Probability of default
- Risk grades
- Credit-risk segmentation
- Underwriting standards
- Automated credit decisions
- Manual underwriting
- Credit scorecards
- Override policies
- Model limitations
- Credit decision documentation
Practical: Building a simplified borrower credit scorecard.
Module 6: Loan Structuring, Pricing & Collateral
Key Topics
- Loan amount determination
- Loan tenor
- Interest-rate structures
- Repayment schedules
- Debt-service ratios
- Loan-to-value ratio
- Debt-to-equity ratio
- Covenants
- Collateral assessment
- Guarantees
- Security documentation
- Risk-based pricing
- Loan structuring techniques
The EBA’s creditworthiness framework considers factors such as income/cash flow, financial position, commitments, business plans, projections and collateral where relevant.
Semester I Applied Assignment
Complete Credit Analysis of a Borrower
Participants analyse a borrower and prepare:
- Credit application
- Financial analysis
- Cash-flow assessment
- Risk rating
- Collateral assessment
- Recommended facility
- Lending conditions