Exceptions to Lending Policy

Current exceptions to our lending policy requires approval of loan committee (2 members signatures) and/or President to approve. My concern is we have had a couple of situations where one of the members of loan committee signing off on the loan is the actual loan officer? Audit continues to note these as an exception item, but management disagrees. Any thoughts or opinions?

Who do you report to? If you are reporting exceptions to the audit committee, they should decide whether it is ok for the loan officer who originates the loan to sign off on the exception.

IMHO the loan officer should not be one of the ones to sign off on the exception. I would keep reporting it as an exception. At least if your examiners cite this, you would have proof that you had cited it as well. It would then be on management to explain why the practice has continued.

I report to audit committee, and will take this to the next meeting. Thanks for the input.

Interpretation by policy and practice...
Consider when a loan is outside an individual officer's approval authority in terms of size. (assuming just out of originating officer's authority) Does your institution require two other officers to concur with that officer's decision, or one officer, plus the originating officer, thus two officers...
I'm assuming that is why the president doesn't believe this is an exception.

In the case of a loan being just outside of the officer's authority it can be approved by one with a higher authority. Policy does state that exceptions to must go thru loan committee. Unfortunately it is not specifically stated that it requires 2 others outside of the originating officer. I can definitely see managements argument on this and unfortunately policy does leave some room for individual interpretation.

By reporting to the audit committee and then the committee to the Board, this will clear up the exceptions you mentioned.