Credit Risk interview prep.

Behavioural questions to expect

1. Walk me through your CV.
2. Tell me about the most difficult credit call you've owned.
3. Tell me about a weakness, a failure, or feedback you've received and worked on.
4. Why credit risk — and why this seat vs the RM / origination side?
5. Which segment or sector would you want to cover, and why?
6. Why the firm?
7. How would you describe the firm's credit culture and risk framework in your own words?
8. How does a commercial bank actually make — and lose — money on credit?

Technical concepts to master

• Independent credit review + the RM-vs-credit tension

  Independent re-underwrite · Delegated authority + credit committee · RM-vs-credit tension · Dissent + escalation · Documentation + audit trail

• Risk rating + PD / LGD / EAD / EL framework

  PD (Probability of Default) · LGD (Loss Given Default) · EAD (Exposure at Default) · EL = PD x LGD x EAD

• CECL / IFRS 9 + allowance mechanics

  CECL — current expected credit loss · IFRS 9 — three-stage expected credit loss · Allowance build + reserve release · Qualitative overlays + management adjustments

• Portfolio + concentration risk

  Concentration limits · Vintage + cycle posture · Leveraged-lending guidance + supervisory limits · Stress testing + capital

• Covenant breach + classification path

  Covenant breach + cure · Amendment / waiver — never for free · Classification migration · Workout / special assets

Practical drills

• A 5-year senior secured term loan of $50m to a strong non-IG borrower: internal rating maps to a 1-year PD of 1.5%, LGD of 35% (senior secured with ~70% collateral coverage), and EAD of $50m (term loan, fully drawn). Pricing is S+275 with a 1% upfront fee. Allocated capital is 8%. Operating cost 100bps. (a) Compute expected loss. (b) Compute RAROC. (c) Does it clear a 12% hurdle? If not, what would change your view?
• The RM brings a deal: $40m senior secured term + revolver to a sponsor-backed middle-market industrial at 4.2x leverage, 2.1x ICR, cov-lite + springing leverage at 5.0x; pricing S+325. The RM recommends approval at an internal grade equivalent to BB-. Walk me through how you'd render an independent view + how you'd handle it if you disagreed at committee.
• A $30m middle-market borrower (manufacturing) graded internal-BB just reported Q3 EBITDA down 25% YoY due to a key-customer loss + raw-materials margin compression; the leverage covenant of <=3.75x will be tripped at year-end (currently 4.1x LTM). Walk me through (a) the early-warning triage, (b) the classification call, and (c) the allowance impact.

Smart-question anchors

• Credit organisation + culture - independent credit reporting, delegated authority, RM-vs-credit balance
• Rating framework + methodology - grade ladder, PD / LGD / EAD calibration, model governance
• Portfolio + concentration - sector limits, leveraged-lending posture, cycle stage view
• Allowance + cycle - CECL / IFRS 9 methodology, recent classified-asset + provision trend
• Stress + capital - internal stress, DFAST / CCAR positioning, capital + risk-appetite link

Sourced from

OCC Comptroller's Handbook — Rating Credit Risk + Allowance for Credit Losses · Risk Management Association (RMA) — Credit Risk Certification + frameworks · FASB ASC 326 (CECL) + IFRS 9 — Expected Credit Loss frameworks · Federal Reserve SR Letters — Credit Risk Management Guidance · S&P / Moody's commercial credit methodology + bank-internal-rating mapping