4  BIS Review 42/2010  This guidance is designed to address workouts and restructurings of problem credit, but the clarification of loan classification standards should also give bankers some confidence in evaluating new loans for both credit risk and risk of classification.
Overall, the guidance urges both lenders and examiners to take a balanced approach in assessing borrowers’ debt servicing capacity and to make realistic assessments of collateral valuations. Importantly, at the Federal Reserve we have complemented these issuances with training programs for examiners and outreach to the banking industry to underscore the importance of sound lending practices.