Credit culture determines what each bank’s credit standards will be, which in turn decides the quality of the bank’s portfolio. Culture comes from the top of the bank. Unless top management has a clear view on the culture it wants and on how to enforce it, the culture is likely to be formless and ineffective, the standards weak, and the portfolio of poor quality. A bank’s credit culture is its attitude to credit, both in absolute terms and in relation to other aspects of the bank’s business. It decides what sort of risk appetite the bank has: high risk, high reward; low risk, low reward; any risk for high reward; only the risks we truly understand and are paid for; almost any risk if it keeps the customer happy; or whatever other format the bank opts for?
KeywordsHigh Reward Head Office Term Loan Risk Appetite Credit Standard
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