Credit Risk Fundamentals: Credit Risk Mitigation Techniques

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This “Credit Risk Fundamentals: Credit Risk Mitigation Techniques” course provides an introduction to methods by which the bank protects its lending by taking security, collateral, loan structuring and covenants.

Suitability

This is a foundation course for Graduate Entrants with no experience in retail and corporate banking.

Learning Outcomes

At the end of this course participants will be able to:

  • Define Expected Loss
  • Describe the forms of collateral and evaluate their effectiveness
  • Describe forms of covenants and evaluate their effectiveness
  • Explain credit subordination
  • Describe how subordination risk is mitigated by loan structuring

Course Content

  • Covenants
  • Establishing the purpose of covenants
  • Types of covenant – representation and warranties; incurrence and maintenance covenants
  • Setting realistic covenants – definitions and headroom
  • Problem situations with covenants – actions on a breach
  • Events of default
  • Fixed and floating charges
  • Collateral
  • Types of collateral and charge available to the bank
  • Perfecting collateral – where things can go wrong
  • Understanding the impact of debt cushioning
  • Subordination in action
  • The ranking of creditors in insolvency
  • Corporate structures and the impact on lending
  • Contractual vs. Structural Subordination
  • Is credit risk mitigation achievable in Cov-Lite structures?

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We are focused on mining the embedded organisational intellectual capital for the benefit of the next generation. We create and curate best in class practice gathered from our experience with the leading financial institutions. We design our programmes with the end in mind – what results are you trying to achieve with this intervention? What metrics will we set ourselves to achieve that?

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