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.


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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