Santander has staffed its Latin American operations with its own credit-risk specialists, who veto any loan that offers less than a risk-adjusted return of 20% a year.
At least that is the way it works when an ordinary citizen judged to be a bad credit risk seeks a loan.
James Adams is a Senior Analyst at Sageworks, a leading provider of credit risk management, loan loss reserve and stress testing software to financial institutions.
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The three major credit reporting agencies, Equifax, Trans-Union and Experian, collect similar information to help businesses answer a basic question: Is the loan or credit applicant a good risk?
The three major credit reporting agencies, Equifax (nyse: EFX - news - people ), Trans-Union and Experian, collect similar information to help businesses answer a basic question: Is the loan or credit applicant a good risk?
It has established ground rules for extending credit to help it manage credit risk, and closely monitors the performance of its loan portfolio.
But even if a liquid market in such securities could be created, it would still rely on banks with experienced loan officers to assess the credit risk of small firms.
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At the same time, ever more layers of securitisation have separated the original lender or broker of a loan from the ultimate bearer of credit risk.
It also hurts those who cannot put down the total price of a car or a stove, since banks if they cannot adjust their rates according to the credit risk simply will not take on loan-seekers who may have a bad credit history.
It was a risk, but she took out a credit card loan and paid for it.
Even given the same credit score, lenders might offer different loan terms, because they have different risk models or competitive pressures.
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These days, though, banks demand bigger down-payments and better credit scores to lessen the risk of having to buy back a delinquent loan from Fannie Mae and Freddie Mac, the now government-controlled agencies that securitise and guarantee most residential mortgages.
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Lenders are required to disclose credit scores to consumers if they are used to assess the risk of a loan applicant.
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For instance, a conventional loan usually takes half the time process including the time it takes to review the credit risk and making the commitment to financing.
"Past experience has taught us that a bad loan crisis usually came three years after a period of abnormal credit surge, " Wei Guoxiong, chief risk management official with the Industrial and Commercial Bank of China was quoted as saying by the Xinhua news agency.
This will leave the high-risk pool now has two options: turn to credit unions, or give up on getting a loan.
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