Definition of Loan committee:
A loan committee is usually responsible for regular credit reviews of the bank’s maturing loans, which are the ones whose terms are nearing completion and are up for renewal. For example, a 10-year loan in its ninth year would be a maturing loan and up for renewal if the borrower is interested in extending the loan. At times, a bank may extend the original credit facility, however, the loan committee must ensure that this is done in accordance with proper procedure. For the bank, it is important to make sure that the borrower’s creditworthiness has not deteriorated.
A loan committee is the lending or management committee of a bank or other lending institution. It generally consists of upper-level officers with management authority. The loan committee analyzes and subsequently approves or rejects any loan that the initial loan officer does not have the authority to approve, typically those of large sizes or higher risk. The committee ensures that the loan meets the institution’s standard lending policy. If it does, the committee can agree to fund and disburse the loan with a binding commitment.
Bank management committee that evaluates and decides some loan applications. Comprised of senior managers and experienced loan officers, it normally considers only those loans that exceed the lending authority of the forwarding loan officer, or loans that require special attention due to the applicants credit history or other factors. The committee looks at the applicants financial statements and credit information to ensure compliance with the banks lending policy and statutory obligations. Its decisions are strongly influenced by the current economic trends, and often by the prevalent image of the applicant firms industry.
How to use Loan committee in a sentence?
- A loan committee consists of the upper management of a lending institution with the authority to approve loans that the initial loan officer does not have the authority to approve.
- The three main credit reporting agencies in the U.S. provide important credit information on borrowers that help loan committees arrive at their decision.
- The loan committee also determines the actions to be taken on delinquent loans.
- The job of the loan committee is to ensure that the loan being reviewed meets regulatory standards, the firm's lending policies, and fits the credit risk appetite of the firm.
- The types of loans that a loan committee reviews are generally of a large size and/or are risky.
- Loan committees assess factors such as risk mitigants, the borrower's credit score, past payment history, outstanding debts, and current liquidity.
Meaning of Loan committee & Loan committee Definition