Bank Loan-Underwriting Practices: Can Examiners' Risk Assessments Contribute to Early-Warning Systems

Loan underwriting practices are the primary determinant of bank credit risk and bank credit availability. For this reason, U.S. bank supervisors conduct periodic surveys to assess bank underwriting practices and their riskiness. In early 1995 the Federal Deposit Insurance Corporation (FDIC) introduced a comprehensive examination questionnaire, or survey, of bank underwriting practices at FDIC-supervised banks; FDIC bank examiners complete the survey at the end of each FDIC-supervised bank examination. This study investigates the relationships between examiners' assessments of the riskiness of bankers' lending practices and subsequent changes in bank condition, and the question of whether these relationships can enhance supervisors' early-warning systems.

Provided by: Federal Deposit Insurance Corporation Topic: Software Date Added: Nov 2003 Format: PDF

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