Every manager has different skills and specialties of expertise. It is quite possible that you could be in a situation where you see something that someone else does not see, especially if they are working under you with less education or experience than you. If a loan officer working under you recommends a loan to a customer, describe (A) when you would authorize that loan, and (B) when you would deny the loan in each of the following cases and give your rationale.
- You disagree with your subordinate because you do not think restaurants are good investments in general, so you have a bad feeling about this customer’s ability to repay the loan based on your experience with the market rather than any financial facts.
- You disagree with your subordinate because you think medical operations are high risk for legal problems, so you have a bad feeling about this customer’s ability to repay the loan based on your experience with the law rather than any financial facts.
- You disagree with your subordinate because you think members of their family are business failures, so you have a bad feeling about this customer’s ability to repay the loan based on your experience with social history rather than any financial facts.
- You disagree with your subordinate because you just have a bad feeling about this customer’s ability to repay the loan based on your gut instinct rather than any financial facts.
- I do not think it is right to take any decision based on a bad feeling I might have. I should and would check the financial and perform other due diligence to make sure that the restaurant can actually run successfully. But since I do not think (in this instance) that restaurants are good investments in general, so I might not be able to give any benefit of a doubt to the business. And I will see if the restaurant company can get an insurance to make sure if they go out of business, still the debts will be repaid. If the financials are strong and other business conditions are strong and with the assurance that the debts will be repaid by the insurance company, only in that case I would authorize the loan.
- First of all, I need to check my organization’s policy. If the policy gives me any direction about what should we do when it comes to such opportunities? Considering that, the policy does not stop me from investing in such opportunities, I would still have an ethical responsibility to be careful with investments. I should definitely check the financial for the customer and consider everything is in great shape, I should seek a risk premium. Because the fact that medical operations are high risk for legal problems, it is my duty to safeguard my company from losses, so if my company policy permits me to get a risk premium, like getting an insurance in case any legal trouble happens to my customer and they go bankrupt my company still gets back the money owed, is necessary. When I get this insurance, I can authorize the loan, otherwise not.
- Denying a loan based on social history is absolutely wrong. So first thing I need to check and verify that financial statements, although I need to make sure that the numbers are correct. One way to look at the situation that the family has a lot of business experience, and this customer could learn from family members and can do well in business. But, if financials are okay, I will have another concern, if the other businesses the family started for valid reasons or did they do something unethical or illegal. Even if the other family members were crooks and hence lost the businesses, I should consider the current customers’ application. If the financials are okay and policy does not stop me from granting the loan I will grant the loan.
- I should ignore my gut instinct and check the financial statements if everything is fine in financials, then I should really revisit my thoughts, just to understand why did I have the gut feeling, did I observe anything subconsciously? I would ask my subordinate about the details, he found based on what he is suggesting the approval of loan, may be that will allow me to see what I think might go wrong. I can always try to seek an insurance for the loan I grant to make sure, if the person is unable to pay, the loan does not go bad. Then, if everything turns out fine and if policy allows me I will grant the loan. In case I find a problem in financials or anything else on paper, I will deny.