The Credit Committee consists of the senior management of the lending institution with the authority to approve loans that the original loan officer does not have the authority to approve.
The types of loans considered by the credit committee tend to be large and/or risky.
The credit committee’s job is to ensure that the loan in question meets regulatory standards, the firm’s lending policy, and matches the firm’s appetite for credit risk.
Credit committees evaluate factors such as risk mitigation, borrower’s credit rating, past payments, outstanding debts and current liquidity.
The three major credit information agencies in the US provide important credit information about borrowers to help credit committees make decisions.
The Credit Committee also determines the actions to be taken in relation to overdue loans.