What is the role of a loan committee in the lending process?

• A. Review material credit requests, ensure policy compliance, approve terms or decline, and oversee risk governance
• B. Manage marketing and client relations only
• C. Set marketing budgets
• D. Collect payments and manage defaulted loans only

Answer: (A)

The key idea is that the loan committee serves as the governance and decision-making body for credit risk in the lending process. It reviews material credit requests, checks that they comply with lending policies, decides on appropriate terms or declines, and oversees risk governance to protect portfolio quality. This structure ensures consistent application of policy, proper risk controls, and escalation of exceptions when needed. The committee typically includes senior lenders and risk officers and handles high-risk or large-amount credits that require broader oversight beyond an individual loan officer.

Functions like marketing and client relations, setting marketing budgets, or collecting payments and managing defaulted loans fall outside this governance role and are handled by other parts of the bank (sales/marketing teams, finance/planning, and collections/operations, respectively).