Lenders have individual authority and can have combined authority w other lenders or the senior credit officer depending on amount. All of that is granted by the board. Anything above the granted limits would need to go to loan committee for approval (made up of board members) and then would be shown to the board in committee minutes. Insider transactions would be the exception as they require board approval.
-------------------------------------------Original Message:
Sent: 09-11-2023 16:41
From: Rob Blackwell
Subject: Tuesday Topic: Should Boards Approve Individual Loans?
While most boards of banks below $10 billion in assets approve loans, the practice is becoming less common. Today, 64% of bank boards approve individual loans, according to Bank Director's 2023 Governance Best Practices Survey. Four years ago, 77% did.
Is the decline in board involvement positive or negative? On the one hand, additional oversight and a diversity of perspectives could help ensure credit holds up in a challenging economic environment. On the other, boards that don't spend their valuable time evaluating and approving loans have more bandwidth to focus on big-picture risk management and strategy decisions.
The $1.5 billion Cooperative Bank of Cape Cod addressed this tension by establishing a board-level enterprise risk management committee to ratify loans above a certain amount. Loans below the threshold are approved solely by the bank's Chief Credit Officer.
Does your board still approve loans? If so, does it approve all loans, or has it adopted an approach similar to the Cooperative Bank of Cape Cod's? Has the higher-rate environment pushed your bank to change (or discuss changing) your policy in any way?
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Rob Blackwell
Chief Content Officer and Head of External Affairs
IntraFi
Arlington, VA
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