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Abstract
Creating a credit culture is an evolutionary process requiring periodic review and enforcement. A financial institution can take 5 steps to revive its credit culture: 1. Make credit quality a strategic objective. 2. Appoint a chief credit officer, and encourage open communication about credit issues. 3. Strengthen credit policies and procedures by, for example, requiring that exceptions to policy be infrequent, properly justified, and carefully documented. 4. Train lending officers to identify and address important credit issues, and establish credit training as a continuous process. 5. Establish responsibility and accountability. Once the building blocks of a sound and prudent credit culture are in place, continued success depends on a board of directors, senior managers, and stockholders who endorse and enforce the new culture.
