Chapter 1
Introduction
Organization of This Book
Chapter 2
The Strategic Environment for Banking
Dimensions of Banking Deregulation
Characteristics of the New Environment
Risk-based Capital Standards
Interstate Banking: An Update
Glass Steagall Act: An Update
Intermediation and Securitization
Competitive Pressure on U.S. Banks
Foreign Competition
Competition from Securities Industry
Consolidation
Spotlight on Risk and Profitability
References
Appendix 2A: Risk-Based Capital Requirements (1992)
Chapter 3
The Credit Management Process
Development of a Credit Culture
Credit Analysis
Credit Approval, Supervision, and Follow-up
Credit Workout
Credit Training
Treament of Loan Loss Reserves: Role of
Supervising Agencies
Cost of Lending Errors
Chapter 4
Credit Management Supervision
The Review and Approval Process
Judgment, Experience, and Continuity
Credit Management and Bank Strategy
Credit Administration
Credit Management—Risk Rating System
Credit Monitoring and Follow-up Management
Loan Losses and Capital Adequacy
Summary
Appendix 4A: Key Positions in the Credit Review and
Approval Process
Appendix 4B: Commercial Credit Application
Appendix 4C: The Rating Wheel
Chapter 5
Credit Analysis
Purpose of the Loan
Sources of Repayment
Historical Financial Analysis
The Financial Statements
Cash Flow Analysis
Financial Forecasting
Techniques of Forecasting
Economic Valuation
Cash Flow as Predictor of Financial Distress
Evaluation of Management, the Industry, and Corporate
Strategy
Interaction of Qualitative and Quantitative Analyses,
Summary
References
Appendix 5A: Selected Information from the 1991 Annual
Report of PacifiCorp
Chapter 6
Risk and Return in Banking
An Analytical Framework to Set Strategic Financial Goals
Loan Pricing and Risk-Adjusted Rate of Return
A Loan Pricing Model
The Model
Loan Pricing: Revenues and Costs and the Concept of
Economic Break Even
Definition of Each Element
Cost Elements
Loan Pricing: Putting It All Together
Loan Pricing Exercise
Loan Pricing Form
Loan Pricing: How It Is Done in Practice
Management of Loan Portfolios
Portfolio Management for the 90s
Appendix 6A: Setting Corporate Financial Goals at
California National Bank: A Hypothetical Case
Chapter 7
Loan Workout
The Loan Workout Process
Commercial Borrower Credit Files
Organization and Management of Workout Activities:
Costs and Benefits of Alternative Appoaches
Identification of Problem Loan Candidates
Effective Workout Management: The Role of the
Human Element
Summary
Chapter 8
The Legal Environment of Lending
Loan Structuring
Documentation: The Loan Agreement
The Role of Legal Counsel
The Relationship: Marketing to Loan Structuring
Managing External Liabilities
Appendix 8A: Sample Loan Agreement
Chapter 9
Credit Training
Training for the 90s
Credit Management: Training Needs
Delivery of Credit Training
Chapter 10
Social Environment for Banking
Corporations in the 90s: Societal Issues
Social Environment: Issues of Particular Concern to Bankers
Community Reinvested Act (CRA)
Banking and the Environment
Other Social Activities of Banks
The CRA and the Credit Process
Appendix 10A: CRA Activities of a Typical Large Bank
Appendix 10B: Statement of Goals (Environmental
Principles)
Chapter 11 Deregulation and the Credit
Management Process
How Banks Can Add Value in Credit Intermediation in the 90s
Securitization
The Emergence of Financial Engineering
Caps, Collars, and Floors
The FDICIA (1991)
Implications for Strategic Credit Management
Chapter 12 Strategic Management of the Credit
Process in the 90s
Creation of a Credit Culture
Risk/Return Pricing
Portfolio Management
Cost-Effective Credit Management
Realities of the Marketplace in the 90s
Summary