Credit Culture denotes the sum of credit values, beliefs, and behaviours of a lending institution. It is what is done and how it is accomplished. The credit culture exerts a strong influence on a bank’s lending and credit risk management. Values and behaviors that are rewarded become the standards and will take precedence over written policies and procedures.
Credit Culture and Risk Appetite
Credit culture varies from bank to bank and is linked to its implicit or explicit Risk Appetite
- Some banks approach credit very conservatively, lending only to financially strong, well-established borrowers
- Growth-oriented banks may approach lending more aggressively, lending to borrowers who pose a higher Credit Risk
- Loan Portfolio Management Comptroller’s Handbook, April 1998 (Updated June 26, 2017, for Non-accrual Status)