Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

CAC > Lecture 4 & 5- Credit documentation and review > Flashcards

Lecture 4 & 5- Credit documentation and review Flashcards

(67 cards)

Start Studying
1
Q

What characteristics does the MAS Notice 612 mandate credit files to have?

A

information in english
adequate
timely

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the reasons for maintaining credit information?

A

proper and effective supervision
MAS and external auditor’s review
evidence for investigating or managing a problem loan

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the sources of publicly available credit information

A 
audited reports 
memorandum and articles of association
search at registry of titles and deeds
newspapers
credit agency & bureau
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the sources of private credit information

A

banker’s opinion
interviewing the client
visiting the client’s premise
minutes of director’s meeting

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What should a credit proposal include?

A

name of borrower
purpose of the loan
details of facility
details of security
total exposure to the borrower and its related companies
background of borrower
industry in which the borrower is operating
discuss the risks and mitigates of lending
make a recommendation for the loan

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are the components of a loan agreement?

A 
introduction
definitions
the loan
security and collateral
conditions precedent
representations and warranties
covenants 
events of default
miscellaneous
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What do audited reports consist of

A

financial statements (b/l, p&l, cash flows,notes to account)
auditor’s report
chairman’s statement
director’s statement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What are the communication problems

A

communicator difficulty to put ideas into words
receiver too quick to jump to conclusion or defence
unsuitable environment
misinterpretation of feedback from receiver

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What are the perception problems?

A

stereotyping
halo effect
perceptual defence
projection

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What are the objectives of visiting a client’s premise?

A

goodwill visit
confirmation of original interview
assessing level of security and comfort
prospect visits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

How do you assess the level of security and comfort?

A

tangible assets
efficiency
management

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

An auditor can issue what kind of report?

A

qualified

unqualified

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is the outline of a credit proposal?

A 
Name of borrower 
Purpose of the Loan
Details of the facility 
Details of the security 
Total exposure to the borrower and its related comp
background of borrower 
industry in which borrower is operating 
discuss
make a recommendation for loan
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is discussed in the details of facility in a credit proposal?

A 
type
amount
term
pricing 
interest period
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is discussed in the details of security in a credit proposal?

A

list of collaterals securing existing and proposed loan

values of collaterals, basis of valuation, dates of valuation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is discussed in the total exposure to borrower and its related companies in a credit proposal?

A

review total facilities to the group

ensure exposure within guidelines (MAS, bank)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is discussed in the background of borrower in a credit proposal?

A

constitution
principal activities, summary, forward plans
financial standing, account grade
risk management policies
account rs strategy, profitability of a/c, progress of rs
provide borrower’s banking rs with other banks, available credit and commitment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is discussed in the industry in which the borrower is operating in a credit proposal?

A 
SWOT
Michael Porter's 
Borrower's position
stage of growth
outlook of industry
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is discussed in risks and mitigates segment of a credit proposal?

A

ascertain primary cash flows (operating)
secondary cash flow (collateral/guarantees)
sensitivity of cash flow

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is a credit proposal

A

a written report of findings and recommendations about a loan application.
written by loan officer to senior management

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is loan agreement?

A

a negotiated document with details on transaction, rights, obligations and duties of all parties to the agreement.
provides basis for legal action in the event of default and non performance by one of the parties

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What affects the form and extent of a loan agreement?

A

type of loan
the complexity of credit transaction
legal jurisdiction that governs loan
borrower’s financial standing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What are the components of a regular loan agreement?

A 
introduction
definitions 
the loan
security/collateral 
conditions precedent
representations and warranties
covenants
event of default
miscellaneous
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What does the introduction of a loan agreement have?

A

date of agreement

parties in agreement

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
What does the definition of a loan agreement have?
definitions to key terms or phrase
26
What does the segment 'the loan' include?
amount terms pricing
27
What does the segment 'conditions precedent' include?
specifies conditions which must be met prior to loan disbursemet
28
What are examples of conditions precedent
submission of corporate resolution receipt of certificate of compliance completion of insurance other requisite documentation
29
What does the segment 'representations and warranties' include?
specific understandings | risk assumptions taken by lender in granting loan
30
What does the segment 'convenants' include?
framework within which the borrower has agreed to operate while the loan is outstanding
31
What are examples of covenants?
``` borrower comply with T&C of loan borrower to conform to sound business practices and conduct business in a responsible manner comply to laws, regulations maintenance of records continuation of business and existence submit information (statements) ```
32
What does the segment 'events of default' identify?
occurrences or events which gives lender certain rights and remedies lender terminate obligation or other action appropriate
33
What are examples of events of default?
borrower defaults in loan repayment borrower becomes a bankrupt borrower violates the covenants borrower engages in activities prohibited by bank
34
What does the segment 'miscellaneous' provide for?
various provisions common to most agreement
35
What are examples of miscellaneous in a loan agreement?
means of communication between parties legal jurisdiction under which agreement is governed provision for ammendments to be made to agreement
36
What is the MAS Notice that requires mantainance of credit files of borrower
MAS612
37
What does the notes to account provide information about?
details | supports information in b/l and profit and loss statement
38
What does the auditor's report do?
gives bank 3rd party professional opinion | authenticity of figures
39
What is a qualified report
some particular uncertainties
40
What is an unqualified report
true and fair view
41
What information is in the chairman's statement?
summarised info on the trading year | predictions for future
42
What information is in the director's report?
name of directors and shareholdings principle activities of company acquisitions and disposal of subsidiaries details of proposed dividends important events affecting the company post bl date
43
What does the memorandum of association set out?
objectives of company
44
What does the articles of association set out
rules and regulation that govern running of company
45
What do you look out for in the documents of association when extending a loan?
borrowing powers of company borrowing powers of directors scope of activities in which company may engage in
46
What information can you find in registry of titles and deeds
details of ownership of property changes to ownership at registry encumberance of property and details lodge a caveat on property
47
What information can you find in the newspapers?
general economic climate industry specific information court proceedings current market price, dividend (listed)
48
What information does credit agency bureau provide?
ratings additional comments credit information ``` financial standing repayment history default history personal profile details record of all credit checks bankruptcy ```
49
What is a banker's opinion
informal exchange of customer's credit information amongst banks
50
What do you look out for in a banker's opinion
date account is opened information about the management types of facilities granted and used
51
What are the favourable banker's opinion
undoubted | good for you figure of
52
What are the cautionary banker's opinion
figure is larger than normally seen | new customer to this bank, prove good
53
What are the unfavourable banker's opinion
resources fully committed capital fully employed cannot speak for your figure
54
What information do you get in an interview with the client?
general information gathering (missing) testing information gathered building banking relationship
55
What is stereotyping
grouping people together based on similar characteristics allocating traits to them
56
What is halo effect
perceive people in terms of good and bad | based on one single trait, all good qualities are possessed/all bad qualities are possessed
57
What is perceptual defence
select information supportive of point of view choose not to acknowledge contrary information
58
What is projection
tendency for people to project their own feelings | motives and characteristics to their perception of other people
59
What does a goodwill visit/call and care do?
build rapport | build existing relationship
60
How do you confirm information in a visit?
see if borrower is doing what he says he is doing seeing first hand customer product or service update on position of business
61
How does the bank check on tangible assets
existence and condition premises: general state and repair physical: physical existence and use stock: saleability, condition, level of stock
62
How does a bank review overall efficiency
location right for type of business premises fully utilised? room for expansion skills of workers, level of activity
63
What are the areas of assessing level of security and comfort in a business?
tangible assets overall efficiency management
64
How does a bank assess management team
depth of team ability to manage staff efficiently quality and motivation of staff ability of owner to delegate to staff
65
What does a prospect visit do?
opportunity to meet new potential customers
66
What is a minutes of director's meeting
what is said and decided at a management meeting
67
What information do you look out for in a director's meeting
review information regarding future of business | ensure board of directors have agreed borrowing(fulfil legality)

CAC (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions