Loan Grading

DEFINITION of 'Loan Grading'

A system of credit scoring that assigns a rating of asset quality to a portfolio of loans. Loan grading is based upon a comparison of all loans that are outstanding within a given portfolio. This system places loans into one of six categories, ranked from most stable to complete write-off, or unreviewed.

BREAKING DOWN 'Loan Grading'

The risk-classification system used by the National Bank Examiner is employed by a large percentage of lenders. They use this system to assign a rating to portfolios of commercial loans. This is because lenders must use the same format when they file their quarterly reports of condition to bank supervisory agencies.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Home Mortgage Disclosure Act - ...

    A federal act approved in 1975 that requires mortgage lenders ...
  3. Ratings Service

    A company, such as Moody's or Standard & Poor's, that rates ...
  4. Bank

    A financial institution licensed as a receiver of deposits. There ...
  5. Loan

    The act of giving money, property or other material goods to ...
  6. Credit Rating

    An assessment of the creditworthiness of a borrower in general ...
Related Articles
  1. Retirement

    How To Invest When You're Deep In Debt

    Debt is one of the biggest obstacles that prevents people from investing - but it shouldn't be.
  2. Personal Finance

    Promissory Notes: Not Your Average IOU

    These may be a handy way to borrow money, but this convenience does not come without risk.
  3. Options & Futures

    Home-Equity Loans: The Costs

    Learn the factors to consider when comparing the different programs offered by various lenders.
  4. Options & Futures

    Payday Loans Don't Pay

    Hold too tightly to this rescue line and you'll soon be drowning in debt.
  5. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  6. Options & Futures

    Different Needs, Different Loans

    Find out what options are available when it comes to borrowing money.
  7. Credit & Loans

    What SoFi's Super Bowl Ad Means for Your Next Loan

    Non-bank lender SoFi will air its first TV ad during Super Bowl 50. Here's how it's challenging big banks by providing an alternative approach to loans.
  8. Stock Analysis

    Bank of America's 3 Key Financial Ratios (BAC)

    Discover some of the key financial ratios that show the quality of Bank of America's loan portfolio and how profitable the bank has been.
  9. Stock Analysis

    Wells Fargo's 3 Key Financial Ratios (WFC)

    Look at some of most important financial ratios for with Wells Fargo & Co. and understand why they are so important for analyzing the bank's core business.
  10. Stock Analysis

    3 Disrupters of Retail Banking

    Understand how the retail banking industry operates and why it's becoming outdated. Learn about three disrupters that are changing the way consumers bank.
RELATED FAQS
  1. How many free credit reports can you get per year?

    Individuals with valid Social Security numbers are permitted to receive up to three credit reports every 12 months rather ... Read Full Answer >>
  2. Do banks have working capital?

    The concept of working capital does not apply to banks since financial institutions do not have typical current assets and ... Read Full Answer >>
  3. Are high yield bonds a good investment?

    Bonds are rated according to their risk of default by independent credit rating agencies such as Moody's, Standard & ... Read Full Answer >>
  4. How does investment banking differ from commercial banking?

    Investment banking and commercial banking are two primary segments of the banking industry. Investment banks facilitate the ... Read Full Answer >>
  5. Why do commercial banks borrow from the Federal Reserve?

    Commercial banks borrow from the Federal Reserve primarily to meet reserve requirements when their cash on hand is low before ... Read Full Answer >>
  6. What role does a correspondent bank play in an international transaction?

    A correspondent bank is most typically used in international buy, sell or money transfer transactions to facilitate foreign ... Read Full Answer >>
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center