OCC Issues Asset Based Lending Booklet
by: Anna DeSimone
March 27, 2014 the Office of the Comptroller of the Currency (OCC) issued its “Asset-Based Lending” booklet, which is new to the Comptroller’s Handbook.
The OCC’s “Asset-Based Lending” booklet provides guidance to examiners and bankers regarding Asset-Based Lending (ABL) activities and risks, prudent credit risk management and underwriting expectations, credit administration, and credit risk rating. Risk-based expanded examination procedures are provided to guide ABL examinations.
Expanded topics include ABL structures, credit analysis, evaluating borrower liquidity, establishing a borrowing base and prudent advance rates, collateral controls and monitoring systems, and credit risk rating considerations. The booklet also includes transaction examples to guide examiners and bankers in the assessment of credit risk.
The 78-page booklet is one of several specialized lending booklets and supplements guidance contained in the “Loan Portfolio Management” booklet, as well as the “Large Bank Supervision” and “Community Bank Supervision” booklets.
The booklet describes the fundamentals and inherent risks of ABL and discusses prudent risk management guidelines and supervisory expectations. The booklet also includes expanded examination procedures to assist examiners in completing assessments of ABL activities. The procedures include an internal control questionnaire and verification procedures to further support the examination process.
Listed below are the key topics in the booklet, which also includes the examination scope:
- Risks Associated With ABL
- Credit Risk
- Operational Risk
- Compliance Risk
- Strategic Risk
- Reputation Risk
- Risk Management
- Loan Policy
- Borrower Analysis
- Establishing the Borrowing Base Term
- Loans Controls
- Third-Party Guarantees or Insurance
- ABL Administration
- Purchasing Participations in ABL Transactions
- Debtor-in-Possession Financing
- Credit Risk Rating
- Considerations
- Problem Loan Management
- Allowance for Loan and Lease Losses
About the Author
Anna DeSimone is President and Founder of Bankers Advisory, Inc. She can be reached at anna@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
Good info, many thank you to the author. It is incomprehensible to me now, but in general, the particular usefulness and importance is overpowering. Thanks again and good luck!
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