Sample interview questions: How do you assess and manage credit exposures in a portfolio?
Sample answer:
Assessing Credit Exposures
- Analysis of Financial Statements: Review balance sheets, income statements, and cash flow statements to assess the borrower’s financial health, profitability, and solvency.
- Industry and Company Analysis: Conduct thorough due diligence on the borrower’s industry, competitive landscape, and company-specific factors to identify potential risks.
- Credit Rating Agencies (CRAs): Utilize ratings from CRAs to supplement internal analysis and gauge external market perceptions of the borrower’s creditworthiness.
- Stress Testing: Simulate potential economic or market events to assess the borrower’s ability to withstand adverse conditions and the potential impact on credit exposures.
- Historical Performance and Customer Relationship: Consider the borrower’s past repayment history, compliance with loan covenants, and overall relationship with the financial institution.
Managing Credit Exposures
- Diversification: Spread credit risk across different borrowers, industries, and geographies to mitigate concentration risk.
- Credit Risk Limits: Establish i… Read full answer
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