I am reviewing separation of duties within our lending department and have made the recommedation that our collections employee should not be involved in making any loans. This employee fills in from time to time and originates loans. Management would instead like to make it policy that any loan he originates he is not allowed to collect on. What are your thoughts on this? Can anyone point me in the direction of specific regs that this is discussed in?

Thanks

This type of thing is discussed in internal controls guidance from the agencies. For a very small bank, that solution would be workable. He doesn't co-approve any loans, does he?

A good process with compensating controls will be adequate.

I think the question would be who will collect his loans? Is there someone else qualified, such as a senior lender?