Mention the 10 important indicators of high credit risk.

According to Bangladesh Bank’s Credit Risk Management guidelines, the following are key indicators that a bank’s credit portfolio carries high risk:

• The level of loans is high relative to total assets and equity capital, indicating overreliance on lending.
• Loan growth rates significantly exceed national trends and the trends of similar banks, suggesting uncontrolled expansion.
• Growth was not planned or exceeded planned levels, stretching management and staff expertise.
• The bank is highly dependent on interest and fees from loans and advances — making it vulnerable to any credit deterioration.
• Loan yields are high and reflect an imbalance between risk and return — indicating risky borrowers in the portfolio.
• The bank has one or more large concentrations. Concentrations have exceeded internal limits.
• Existing and/or new extensions of credit reflect liberal judgment and risk-selection standards. Practices have resulted in a large number of exceptions to the credit policy.
• The bank has a large volume and/or number of classified loans.
• Even among standard and special mention loans, the portfolios are skewed toward lower internal ratings.
• Classified loans are skewed toward the less favourable categories — Doubtful and Bad/Loss.
• Collateral requirements are liberal, or if conservative, there are substantial deviations from requirements.
• Loan documentation exceptions are frequent and remain outstanding for long periods.
• The bank liberally reschedules and/or restructures loans in a manner that raises concern about the accuracy of reported NPL numbers.
• Quarterly loan losses as a percentage of the total loan portfolio are high and/or routinely exceed established provisions.