HND个人及商业信贷.docx

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HND个人及商业信贷.docx

HND个人及商业信贷

SAMPLEINSTRUMENTOFASSESSMENT

CASESTUDY

ThisCaseStudyshouldbeprovidedtocandidates7-10dayspriortotheassessmentdate.AcopyoftheCaseStudyshouldbeprovidedtoeachcandidateonthedateoftheassessmentalongwiththequestions.

Allquestionsmustbeanswered.

YouarethemanageroftheWestEndbranchoftheBellBankplc.

YourbranchhasbeenaskedtotrainMichaelSamuels,anewGraduateManagementTrainee.MichaelhasadegreeinArchitecturefromGlasgowUniversitybuthasdecidedthatacareerinfinancialserviceswouldbemorechallenging.

Michaelhasnowbeenwithyoufortwoweeksandhasshownakeenwillingnesstolearn.Youhaveencouragedthiswillingnesstolearnbyallowinghimtositinduringsomeofyourinterviewswithyourcustomers.YouhavesuggestedthatMichaeltakenotesduringeachinterviewandthenusethesenotestoaskyouquestionsrelatingtoeachoftheinterviews.

Michaelhassatthroughfourinterviews.Someofthematerialfactsrelatingtoeachinterviewareprovidedbelow.

Interview1

JohnandMaryMcCuskerhavebeencustomersofyourbranchfor18years.YouhavegottoknowtheMcCuskersquitewellduringyourthree-yearstayattheWestEndbranch.

Johnearns£35,000peryearfromhisjobasaQuantitySurveyorandMaryearns£21,000peryearfromherjobasaNurse.TheMcCuskershavethreechildrenaged14,12and10.ThetwoyoungestchildrenhavealwayssharedabedroombuttheMcCuskersnowfeelthetimeisrighttomovetoalargerhousetogiveallthreechildrentheirownbedroom.

Youhadagreedatanearlierinterviewtoprovideacapitalandinterestmortgagefacilityfor£120,000over20years,andtheMcCuskershavesincepurchasedanewfour-bedroomedhouseinHamiltonfor£175,000.TheirexistinghomeinLanarkhasbeensoldfor£120,000andtheMcCuskershave£40,000outstandingontheircurrentmortgageloan.

TheMcCuskershavenowidentifiedaprobleminthattheyhavearrangedtomoveintotheirnewhomeon10Maybuttheirbuyerswillnotsettleontheiroldhomeuntil4June.

MichaelSamuelsiscurioustolearnwhatprocessyouusedtodecideuponthemortgagefacilitythatyouagreedtoprovidetheMcCuskers,andtolearnwhatyouintendtodotohelptheMcCuskersovercometheirnewproblem.

Interview2

Youdiscussedprovidingatermloanof£80,000over15yearstoyourcommercialcustomers,AlbionTyresLtd.MarkandJamesThomas,afatherandson,runthecompany,whichhastradedsuccessfullyfor8years.MrThomas,Senioris52yearsofageandhissonis28yearsofage.

Thebusinessemploysfourmembersofstaff,threeofwhomaretyreandexhaustfitters,andoneofwhomdealswithofficeadministration.Oneofthefittersalsodealswithmattersrelatingtobrakeandsuspensionrepairs,apartofthebusinessthataccountsforaround15%oftheoverallturnover.

Thecompany’sexistingpremisesarenowtoosmallforthebusinessandtheyhaveidentifiednewpremisesinthecentreoftownthatwouldsuittheirpurposes.Itisexpectedthatbymovingintothecentreoftownthattheirturnoverandprofitsshouldincreasebyaround20%perannum.

Thecompanyhasproducedasubstantialandimpressivebusinessplan,includingacashflowforecastthatshowsthatthebusinessshouldbeabletocomfortablymeetthenewcommitments.

Thebusinessplanhasalsoincorporatedthelastthreeyears’accounts.

YouhaveaskedtheThomas’toallowyoutimetoexaminetheinformationintheaccountsbeforeconfirmingyourdecision.

Interview3

MonicaRobertsrequestedaloanof£8,000over5years.Shehassatisfiedyouthatshecanaffordtherepaymentsbuthasinsistedthattheloanbesecuredinreturnforareducedrateofinterestbeingchargedbyyourbank.

YouhaveagreedtoapprovetheloanandMonicahasoffered2,000SharesinCICplc(currentmarketprice450ppershare).Shehasalsooffered£2,0006%TreasuryStock2011(currentmarketprice£102).

Interview4

Youarrangedanappointmentwithyourbusinesscustomer,JohnThomson,todiscusssomeconcernsthatyouhavebeenhavingwiththeoperationsofhisbusinessaccount.YouhavenowmadesomesuggestionstoMrThomsontohelphimtoregularisehisfinancialposition.

MichaelSamuelsissomewhatconfusedastohowyouwereabletoidentifythattherewereproblemswiththeoperationsofthebusinessinthefirstplace.

QUESTIONS

Allquestionsmustbeattempted.

1.FollowingtheinterviewwiththeMcCuskers,Michaelhasaskedyoutoexplaintohimtheproceduresthatalenderwouldusetoensurethatthedecisionmadeissoundandjustifiable.

SummarisethePrinciplesofLending,identifyingthetypeofinformationthatyouwouldhaveobtainedfromtheMcCuskersduringtheinterviewforthemortgageapplication.

2.MichaeliscurioustolearnhowyouintendtodealwiththeMcCuskers’newproblem:

a.IdentifythemostappropriateloanfacilitythatwouldhelptheMcCuskersovercometheircurrentpredicament.

b.Explainthemainfeaturesofthisloanfacility,and

c.CalculatethelevelofborrowingrequiredbytheMcCuskers.

3.YouhavespenttimewithMichaelshowinghimhowtocalculatevariousratiosfromtheaccountsthatAlbionTyreshaveprovided.Thefollowingratioshavenowbeencalculated:

RatioYear2001Year2003Year2004

CurrentRatio2.4:

12.6:

12.8:

1

LiquidRatio0.5:

10.8:

11:

1

GrossProfit%56%58%57%

NetProfit%23%21%20%

ROCE%42%45%56%

DebtorsRatio12days10days10days

CreditorsRatio45days55days55days

StockTurnover55days65days68days

CapitalGearing12%10%15%

ExplaintoMichaelhoweachratiowouldhavebeencalculatedandhowthesefiguresmightbeinterpretedfromalendingviewpoint.

4.AlbionTyresareplanningtomovetonewpremises.Youhaveidentifiedthatoneoftheiremployees,whospecialisesinbrakesandsuspensions,isaparticularlyimportantsourceofthecompany’ssalesandprofits.

Michaelisconcernedthatthebusinessmightsuffertemporarilyifthatemployeeweretofallill.

a.Identifythemostrelevanttypeofancillarybusinessinsuranceproductthatwouldprotectthecompanyagainstlossesincurredduetotheemployee’sillness.

b.Summarisethemainfeaturesofthisproduct,clearlyexplainingwhyyouconsiderittobesuitable.

5.MichaeliscurioustolearnhowyouintendtogoabouttakingsecurityoverthesharesandgovernmentsecuritiesofferedbyMonicaRoberts.Summarisethemethodsusedtoensurethatsecurityifeffectiveovertheseassets.

6.MichaelwasquiteimpressedthatyouwereabletoidentifyfromJohnThomson’sbusinessaccountsthathisbusinesswas‘gettingintotrouble’.

Listandexplainfourofthewarningsignsthatalendercanidentifyfromthecompanyaccountsofabusiness.

 

Assessmenttask

1

Outcome(s)covered

1,2,3,4

Suggestedsolutionandmakinganassessmentdecision

SuggestedSolutionstoSampleAssessment

1.Thecandidateshouldidentifytheprinciplesoflending.PreferablythecandidatewilluseoneoftherecognisedmnemonicssuchasPARSERS,CAMPARIorCCCPARTStoidentifytheprinciples.Creditshouldbegiventothestudentregardlessofthemnemonicused.ForthepurposeofthissolutionPARSERSisbeingused.

Theprinciplesthatshouldbediscussedare:

Person-Character,capabilityandcapital

AmountandPurpose

Repayment–Sourceandtiming

Security

Expediency

Remuneration

Services.

Thetypesofinformationthatwouldbeobtainedundereachheadinginclude:

Person:

∙Ageanddateofbirth(ifnotalreadyknownfromfiles)

∙Children’snamesandages

∙Employmentdetails(althoughthismaybelistedonfile,itisimportanttoconfirmthattherehavebeennochangessincethelastinterview)

∙Salary(althoughindependentconfirmationwouldberequired)

∙Expenditure

∙Assetsandliabilities

∙Previouspaymenthistory.

AmountandPurpose:

∙Reasonforloanrequest

∙Amountofloanrequired

∙Confirmationthatpurposeisacceptable(surveyrequiredtoensurethatvalueandconditionofthepropertyissuitable)

∙Termofborrowing

∙Affordabilityofborrowing.

Repayment:

∙Confirmationofhowoftensalaryispaid(thereisnowscopetosetuprepaymentonatwo-weeklybasistoreduceoverallcostofborrowing)

∙Confirmationofreceiptofsalariestobank

∙Confirmationfromemployersthatemploymentispermanent.

Security:

∙Standardsecurityovernewhomerequired

∙Confirmationthatthepropertycanbetakenassecurity

∙Valueofpropertyshouldbeconfirmedonbricksandmortarandreinstatementbasis

∙Confirmationthatlifecoverhasbeenarranged,andassignifrequired.

Expendiency:

∙Shouldbeexplainedifidentifiedasoneoftheprinciples

∙However,itdoesnotreallyapplyinthissituation.

Remuneration:

∙Confirmationhowfees,suchassolicitorsfees,valuer’sfees,lender’ssetuporarrangementfees,stampduty,etcaretobepaid

∙Interestratetobedeterminedbytypeoffacilitybeingtakenbyborrower

∙Aretheylookingforvariable,fixed,cappedrateetc.

Services:

∙Otherproductsthatmightberelevantshouldbeexplainedeg:

oPaymentprotectioninsurance

oBuildingsandcontentsinsurance

oLifeassurance.

2.a.TheMcCuskerswillrequireaclosedendedbridgingloan

b.Abridgingloanisrequiredtoprovideshort-term,largecapitalloanstoassistbuyersofproperty,whohavenotyetreceivedtheproceedsfromthesaleofanotherproperty.

Wherethebuyerisbuyingandsellingapropertyatthesametime,itmaybethatthedateofentrytothenewhousewilldifferfromthedateofsaleoftheexistinghouse.

Sincemostbuyersneedatleastsomeoftheproceedsfromthesaleoftheirexistinghousetofinancethepurchaseprice

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