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Definition Of Loan Grading:


A system of credit scoring that assigns a rating of asset quality to a portfolio of loans.
Loan gradingis based upon a comparison of all loans that are outstanding within a given portfolio. This system places loans into one of six categories, ranked from most stable to complete write-off, or unreviewed. The risk-classification system used by the National Bank Examiner is employed by a large percentage of lenders. They use this system toassign a rating to portfolios of commercial loans. This is because lenders must use the same format when they file their quarterly reports of condition to bank supervisory agencies.

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