Capital Markets Examiner School, Providence, RI

Credit Risk-Example of Due Diligence

 How does the grid apply and what should examiners see for the following issuers:  Consider credit review “tear sheets” for:  A large community bank – small regional bank ($5 – 15 billion)  High Profile/Actively Traded Name General Obligation Bonds (preferably mid-level IG – AA-A)  Low-rated, relatively unknown, thinly traded municipal revenue bond  Private-label MBS  How well do the analyses present the credit profile of the various securities?  Are there any specific strengths or weakness of this approach?  Is this sufficient support for due diligence?  If not, what should be added?

Credit Risk-Example of Due Diligence

 Please refer to slides in Appendix A for credit analyses.

 Points for consideration:  Does the document adequately describe the borrower?

 Can you understand the terms and structure of the investment?  Is the operating environment of the borrower clearly presented?  Is there sufficient information to assess the borrower’s financial wherewithal?  Does it at a minimum address the OCC grid?

 Go to www.menti.com to rank how well the tear sheets reflect due diligence concerns.