Bank Lending

MODULE TITLE: BANK LENDING

MODULE CODE: FS3009C

MODULE LEADER: NIRMALA LEE

STUDENT NAME: DANG TRUNG HIEU

STUDENT ID: 06036243

Word Count: 1805 (excluding references)

“Banks should establish overall credit limits at the level of individual borrowers and counterparties, and groups of connected counterparties that aggregate in a comparable and meaningful manner different types of exposures, both in the banking and trading book and on and off the balance sheet.”

Principle 5, (2000) Principles for the management of credit risk, Basel Committee on banking Supervision.

The important role of banks in the economy is obvious, one of the main functions of banks is lending for various kind of borrowers and for different purpose. The fact has shown that there are always chances that banks will not get back the loans or in other words, banking credit often carries risk. Thus the efficient credit risk management is always a key principle in bank lending activities. According to Principle 5, (2000) Principles for the management of credit risk, Basel Committee on banking Supervision. “Banks should establish overall credit limits at the level of individual borrowers and counterparties, and groups of connected counterparties that aggregate in a comparable and meaningful manner different types of exposures, both in the banking and trading book and on and off the balance sheet.” In term of lending products, mortgage is a very popular one offered by banks, mostly in countries such as the UK and the US. Mortgage could be considered as long term bank credit that also bears risk. In the UK, most banks or building society do offer mortgage, and the UK is one of the countries that have highest rate of using mortgage as a way for individuals or groups to purchase the property. Banks therefore should have proper strategy on mortgage credit to reduce risk. The collapse of Northern Rock was a result of the...