Loan administration is an area where a bank could suffer a significant financial loss from the lack of appropriate segregation of duties or dual controls, as well as incur considerable damage to its reputation if operational risk factors are not properly mitigated.
A few recurring recommendations from our reviews, are to: (1) ensure that loan officers do not have the ability to book and maintain their own loans, (2) limit employee access to loan system computer applications that are inconsistent with their responsibilities, and (3) provide consistent guidance - policies and procedures - to line staff on how to identify and handle unusual transactions.