Dangers of Deficient Loan Administration

Ineffective loan administration systems can pose the following common documentation dangers for banks and credit unions:

  1.  Incomplete financials and credit files, discovered during exams or audits
  2. Outdated risk ratings due to missing or expired documents
  3. Delayed identification of problem loans

Some of these dangers will lead to prompt regulatory action while others will chip away at the bank or credit union’s asset quality over time. In this paper, we will address each of the dangers and, more importantly, explain how bankers can prevent the dangers outright through a sound loan administration process or solution.

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