Taking stock

How effective is your loan review function?

Taking stock: How effective is your loan review function?

Does your loan review meet the demands of regulatory guidance? Answer these questions to perform a high-level assessment of your loan review area.

Oversight, structure, and governance

  • How effective are board reporting and oversight procedures?
  • Is there adequate oversight by the institution’s executive management?
  • Is the loan review function fully independent of the lending process?
  • Are findings and reports presented directly to the board or board committees?
  • Is the loan review function evaluated regularly by an independent party?

Loan review charters, policies, and procedures

  • Are there compliance and regulatory gaps or deficiencies within the loan review section of the institution’s loan policy and procedure manuals?
  • What additional enhancement should be made to the loan review policy and procedure manuals based on industry best practices?
  • What are the key findings from interviews with members of management and on-site reviews of the loan review processes?

Scope of loan review

  • How often is the scope of the loan review function revisited?
  • What is the process for reviewing the scope? Does the organization do a risk assessment to review scope?
  • What new lending products have been added, and are non-loan investments part of scope?
  • What are the areas of concentration? Have they changed over time?

Content of work papers

  • Do work papers provide proper detail and show how conclusions are calculated?
  • Are risk-rating assignments accurate, timely, well-supported, and consistent with policy guidelines?
  • How accurate and timely is credit analysis?
  • Do work papers adequately capture credit administration issues or trends and identify lapses in monitoring or documentation?
  • Is problem loan management adequately assessed and documented?
  • Is there adequate tracking of trends such as policy exceptions, documentation, and credit administration concerns?
  • Is there sufficient credit and collateral documentation?


  • Do scheduled reports adequately reflect content and trends from work papers?
  • Are policy exceptions tracked and verified?
  • Is there an adequate process for following up on issues? Are management responses well-thought-out, with specific actions and timelines?
  • Are issues from prior reports followed up on subsequent reviews?
  • Does the audit committee maintain adequate involvement?


  • Is there enough staffing to meet the annual loan review plan?
  • How effective are training and continuing education in the department?
  • Are the competencies, qualifications, experience, and depth of personnel adequate?
  • Are the qualifications of third-party providers or contractors reviewed and confirmed?

Contact us

Want to learn more about how we can help you strengthen your loan review function?
Guilio Camerini
Giulio Camerini
Principal, Consulting
Steve Krase
Steve Krase
Principal, Financial Services Consulting