Credit Analysis:
The division of the bank responsible for analyzing and making recommendations on the fate of the most loan applications is the credit department. This department should satisfactory answer three major questions regarding each loan application:
Is the borrower creditworthy?
Can the loan agreement be properly structured and documented?
Can the bank perfect its claim against the assets or earnings of the customer so that, in the event of default, bank funds can be recovered rapidly at low cost and with low risk?
3.3 Written loan Policy:
One of the most important ways a bank can make sure its loans meet regulatory standards and are profitable is to establish a written loan policy. It should contain:

Ø A goal statement for the bank’s loan portfolio.
Ø Specification of the lending authority given to each loan officer and loan committee.

Ø Lines of responsibility in making assignments and reporting information within the local loan department.
Ø Operating procedures for soliciting, reviewing, evaluating, and making decision on customer loan application.
Ø The required documentation that is to accompany each loan application and what must be kept in the bank’s credit files.
Ø Lines of authority within the bank, detailing who is responsible for maintaining and reviewing g the bank’s credit files.
Ø Guidelines for taking, evaluating, and perfecting loan collateral.
Ø A statement of quality standards applicable to all loans.
Ø A statement of the preferred upper limit for total loans outstanding.
Ø A description of the bank’s principal trade area, from which most loans should come.
Ø A discussion of the preferred procedures for detecting, analyzing, and working out problem loan situations.