May 2021

Loan review has become a mainstay third line of defense for loan portfolio risk management in financial institutions of all sizes.   Loan review has also taken on increased significance  as it is used both to ensure appropriate credit grading and to assist in the determination of loan loss allowance.  Regulators often assess an institution’s loan review program in reviewing the appropriateness of the loan loss allowance.

We believe the key to a successful loan review program starts with a sound loan review policy.  The policy should serve as the roadmap in which management, the board and regulators can point to in support of safe and sound risk management practices.

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