Financial Regulation & Supervision. Andrews Bank case study Essay

Financial Regulation & Supervision. Andrews Bank case study - Essay Example Adam is a newly hired commercial loan officer in training at the Andrew and Andrews Bank. After clearing several credit analysis exams, he joined the bank with zeal and fervor towards credit analysis. Several of his seniors noticed him for his intelligence and smartness. Soon Adam was promoted to be a financial analyst and was assigned to his superior, Jon Smith who was a commercial loan officer. As part of his job, Adam was required to conduct credit analysis to check credit worthiness for all new customers that Jon brought into the bank. In one such case, where Roberts and Roberts had requested for a five million pound loan, Adam was extremely confused by the way Jon had handled the situation. Adam noted that the company, a retail store chain, was very highly leveraged with most of the exposure being handled by his bank. In most of the cases, Roberts and Roberts had undertaken operating leases which were not part of the long term loans like other leases. As an accounting regulation , finance leases are classified as long term loans while operating leases only come under contingencies and commitments and in the notes. As a result, Roberts and Roberts was playing with accounting rules and noting its operating leases under notes. Subsequently, when Adam analyzed the credit worthiness of the company, he found that the company was dangerously over leveraged and therefore was not a safe investment or customer for the bank. Adam included this element into his analysis in the memorandum which he then forwarded to Jon so that she would include that in the credit file. However, Jon decided not to include that in her credit file and the file was later approved by the credit committee with the operating lease issue never coming up in the credit committee meeting. After this scenario, Adam overheard a conversation between Jon and other colleagues. Apparently, Jon had a personal mortgage loan application approved by the Sheffield Building Society. It was also found that the President of Roberts and Roberts was also chairing the board of the society. Adam also found that extremely favorable rates were offered to Jon on the personal mortgage. Adam was thoroughly confused because of the unfolding scenario and this case now portrays several ethical concerns. Following this is an outline of the ethical concerns that are raised by this case along with the action steps that Adam should take in order to fix the situat ion. Moreover, certain recommendations for the organization are also put up in order to avoid such situations in the future. Ethical Concerns Highlighted in the Case Various ethical concerns have been highlighted in the case based on the scenario outlined above. The first issue that has come up is that Jon has been given the sole responsibility to present the credit file to his superiors and the credit committee which leads to issues such as dependency on only one person who can be easily