Credit and Lending Decisions (AFCP856)

This unit will be known as Lending and Borrowing Decisions in 2018.

In this unit we contrast quantitative credit decisioning models with the more tailored approach required for larger clients. Analytical techniques used to generate default probabilities and loss given default estimates are explained. The process of formulating a financing or credit proposal is analysed, linking the needs of the borrower and the protections required by the lender.

Learning Outcomes:

  1. Understand how the nature of the loan and the class of borrower will influence the style of credit decisioning on the quantitative (credit scoring) - qualitative (expert judgment) continuum.
  2. Appreciate the range of methods and products available for debt financing and how to apply them appropriately; including the significance of unsecured, secured and subordinated features.
  3. Recognise the importance of aligning the needs of a borrower and the risks a lender is prepared to accept and be able to outline the structural and documentary mechanisms for achieving this (including the functions performed by representations & warranties, financial covenants, undertaking, events of default and review).
  4. Describe the process through which a potential credit facility for a business/corporation is defined, evaluated, structured, decisioned and monitored.
  5. Understand (in principle) the issues related to management or problem loans.
  6. Appreciate the importance of culture, effective governance and regulation to credit processes in a large financial institution.

Topics:

  1. The debt stakeholder as an investor
  2. The borrower and the loan
  3. The process to the credit decision
  4. Structuring the loan/credit facility
  5. Managing loans and credit facilities
  6. Credit risk in financial institutions

Prerequisite units:

Lecturer:

Unit guide:

Credit and Lending Decisions - The link will provide a list of guides for this unit. If the desired term/location is not listed, please view the latest one available.

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