Credit Decision Analysis On Commercial Bank's Enterprise Clients

As we all know, the bank's most important activities is the extension of credit. The banker must remember that the money he lends is not his bank's own money. It is money deposited by the bank's customers, whether in a demand or time account. This basic consideration limits the degree of risk that a commercial banker will take. So the bankers must take the credit decision-making.To evaluate the risk , the banker must first obtain certain basic information that usually is forthcoming in a meeting with the potential borrower. Once the banker has obtained the desired information from the applicant, he considers the risk involved. This means evaluating the character, capacity, and capital of the borrower, his ability to repay, and the soundness of his financial position.A potential borrower's credit-worthiness is determined by previous loans and by his standing with credit rating bureaus or other banks. And the credit decision is partly based on an analysis of the financial statement, comparing various parts to determine ratios that can in turn be compared to industry norms. Other considerations include the bank's prior experience with the borrower and the nature of his business. The experience of the credit officer is also a factor in the assessment because different credit officers may differ in their conclusions.Briefly speaking, to make the credit decision-making, the banker must make an investigation of the credit standing, the operation state of the enterprises, the possibility of repayment and so on.