Credit monitoring – is a system of bank control over the overall process of money lending – it is manifested in the regular control of passing individual loans, as well as the quality of the credit portfolio in general.
Monitoring may be of two types: monitoring of the loan subscriber and monitoring of the lending bank.
Approximately all the units of the bank take part in the monitoring of the debtor: legal, security, operational, if necessary – departments engaged in foreign exchange operations and stock transactions, analytical, and others. Certainly, the credit department plays the major role.
Credit officer must fix the control activities and give an account regularly about the work which has been done with the submission of the analytical conclusions about the level of risk for each credit, and credit manager – about a bank’s credit portfolio in general.
Watching for a loan is aimed at gathering information about the borrower during the period for which the credit is issued, to establish control over the change for the worse for the bank side of that data that formed the basis for an initial assessment of the credit worthiness of the borrower.
Monitoring of the loan differs from the primary evaluation of credit standing:
- According to the time of fulfillment. Check of credit standing is carried out prior to issuing the credit, and the observation starts after the issuance of the loan;
- According to intended purpose. Credit check is conducted to identify risk before making a final decision on lending, and credit monitoring is performed to determine the credit risk over time,when the credit is issued;
- According to periodicity. Credit check is carried out in its original form once, and monitoring of credit is current, i.e. periodic or systematic;
- According to volume – when calculating the credit standing, reliability of the fund receiver and collateral is evaluated.
The aim of monitoring the loan is following:
Protection of the bank’s property from losses;
Fulfilment of regulatory requirements of the Central Bank;
Compliance with loan covenants;
Maintaining the solvency of the debtor at the proper level;
Enhancement of the quality of credit portfolio;
Well-timed organization of the work with problem lenders.
The object of monitoring is observance of the credit agreement.
The bank pays attention to the timeliness of all documents provided in the contract (financial statements, certified by the Tax Inspectorate, the individual decoding to the balance sheet, etc.), checks the proper use of the loan, timeliness and fullness of payment of the main debt and interests.
Those who managed to get a loan for any purpose certainly have to order credit reports regularly. These reports can show you a real picture of your credit but in many cases the reports are very complicated to understand. Here you can make use of credit report monitoring service – they will make the reports easy to understand.
