Bank Lending

Sophisticated banking is vital for modern society to function and prosper. Banks lend to individuals and corporations but do so after carefully exploring the risks they undertake to each customer.
 
This book examines the important role of lending in banking operations and how banks can implement safe and effective loan initiatives. Banks rely on lending to generate profits, but it can be a risky venture. It is important for banking professionals to understand how to mitigate those risks.
 
Bank Lending from the Hong Kong Institute of Bankers discusses a variety of topics that impact a bank's loan strategy. This is an essential read for candidates studying for the HKIB Associateship Examination and those who want to acquire expert knowledge of Hong Kong's bank lending system.
 
Topics covered in this book include:
* Assessing and reducing lending risk
* Understanding the customer through financial statements
* Using ratios to determine risk
* Setting up an internal structure to reduce risk
* Pricing and managing loans
 
Dah Sing Bank is delighted to sponsor this resourceful book. The Dah Sing Group is a leading financial services group in Hong Kong, active in providing banking, insurance, financial, and other related services in Hong Kong, Macau, and the People's Republic of China. The Dah Sing Group has gained a reputation as one of the most progressive and innovative financial services groups. Keys to its success are the strength of the Dah Sing management team and the group's commitment to serving its customers.

List of contents

Preface ix
 
PART 1 PERSONAL AND CORPORATE LENDING 1
 
1 Lending to Personal Customers 3
 
Introduction 4
 
General Lending Principles 4
 
Types of Personal Customers 5
 
General Purposes of Personal Advances 6
 
Types of Lending to Individuals 7
 
Consumer Credit Data 22
 
Evaluating a Personal Advance Application 24
 
Summary 26
 
Key Terms 26
 
Study Guide 27
 
Further Reading 27
 
2 Lending Considerations for Corporate Customers 29
 
Introduction 30
 
The Balance Sheet 30
 
The Profit and Loss Account 37
 
The Cash Flow Statement 42
 
Cash Budget and Cash Flow Forecast 49
 
Reliability of Accounting Information by Source 50
 
Summary 55
 
Key Terms 55
 
Study Guide 56
 
Further Reading 56
 
Appendix 2.1: Comparing FIFO, LIFO, and AVR Inventory Methods 57
 
3 Financial Ratios and Operating Risks 61
 
Introduction 62
 
Techniques of Financial Analysis 62
 
Understanding Ratio Analysis 63
 
DuPont Analysis 80
 
Limitations of Financial Ratios 81
 
Operating Risks of the Borrower 82
 
Analysis Tools and Approaches 86
 
Summary 94
 
Key Terms 94
 
Study Guide 95
 
Further Reading 95
 
PART 2 CORPORATE CREDIT 97
 
4 Credit Assessment 99
 
Introduction 100
 
Lending Principles 100
 
Credit Decision Tree 102
 
Credit Risk Rating 110
 
Summary 118
 
Key Terms 118
 
Study Guide 118
 
Further Reading 119
 
5 Structuring a Loan Facility 121
 
Introduction 122
 
Security in Bank Lending 122
 
Conditions and Covenants 132
 
Pricing a Loan Facility 134
 
Summary 140
 
Key Terms 141
 
Study Guide 142
 
Further Reading 142
 
Appendix 5.1: Sample Loan Agreement 142
 
Appendix 5.2: SME Funding Schemes 148
 
6 Meeting Business Needs 151
 
Introduction 152
 
Business Sectors in Hong Kong 152
 
Types of Credit 163
 
Trade Finance 169
 
Working Capital Management 180
 
Summary 186
 
Key Terms 186
 
Study Guide 187
 
Further Reading 187
 
7 Credit Control and Problem Loans 189
 
Introduction 190
 
Credit Management Process and Structure 190
 
Characteristics of a Sound Credit Monitoring System 196
 
Credit Risk Mitigation 197
 
Corporate Failure 198
 
Remedial Actions 202
 
Summary 206
 
Key Terms 206
 
Study Guide 206
 
Further Reading 207
 
Index 209

About the author

The Hong Kong Institute of Bankers (The HKIB) has been serving the local banking community in the provision of education and training since 1963. In 1995, with the encouragement and support of the local banking community, the Institute declared its independence from its parent institute in UK. With an independent status, the Institute is able to better serve the training needs of the bankers in the region and to reflect the importance of Hong Kong as an international financial center.
The continuous professional development program, which comprises of professional examinations and training courses, has helped bank employees to make advancements in their banking career, and is valued by most of them who are determined to strengthen their knowledge base.

Summary

Sophisticated banking is vital for modern society to function and prosper. Banks lend to individuals and corporations but do so after carefully exploring the risks they undertake to each customer.

This book examines the important role of lending in banking operations and how banks can implement safe and effective loan initiatives. Banks rely on lending to generate profits, but it can be a risky venture. It is important for banking professionals to understand how to mitigate those risks.

Bank Lending from the Hong Kong Institute of Bankers discusses a variety of topics that impact a bank's loan strategy. This is an essential read for candidates studying for the HKIB Associateship Examination and those who want to acquire expert knowledge of Hong Kong's bank lending system.

Topics covered in this book include:
* Assessing and reducing lending risk
* Understanding the customer through financial statements
* Using ratios to determine risk
* Setting up an internal structure to reduce risk
* Pricing and managing loans

Dah Sing Bank is delighted to sponsor this resourceful book. The Dah Sing Group is a leading financial services group in Hong Kong, active in providing banking, insurance, financial, and other related services in Hong Kong, Macau, and the People's Republic of China. The Dah Sing Group has gained a reputation as one of the most progressive and innovative financial services groups. Keys to its success are the strength of the Dah Sing management team and the group's commitment to serving its customers.

Product details

• Authors: Hong Kong Institute of Bankers (Hkib), Hkib, . Hkib, Hong Kong Institute of Bankers (COR), Hong Kong Institute of Bankers (Hkib), Hong Kong Institute of Bankers HKIB, Hong Kong Institute of Bankers(HKIB)
• Publisher: Wiley, John and Sons Ltd
• Languages: English
• Product format: Paperback / Softback
• Released: 08.11.2013
• EAN: 9780470827451
• ISBN: 978-0-470-82745-1
• No. of pages: 304
• Subjects: Social sciences, law, business > Business > Management; Kreditvergabe, Finance & Investments, Finanz- u. Anlagewesen, Geld u. Bankwesen, Money & Banking