What is delegated lending authority?

Delegated lending authority defines who can approve which credit decisions. The board of directors sets the framework in the loan policy and assigns individual or joint approval limits to officers, often based on experience and role. Requests above an individual's limit escalate to more senior officers, a credit committee or the board itself.

Limits are usually tied to total relationship exposure rather than a single loan, and they often vary by risk rating, loan type, collateral and the presence of policy exceptions. Many institutions require two signatures for larger approvals and separate credit officer approval from relationship managers. Authority levels are reviewed periodically and adjusted based on performance.

Common control gaps include approving loans based on the new loan amount instead of total related exposure, splitting requests to stay under a limit, and failing to aggregate affiliated borrowers. Approvals for renewals, modifications and covenant waivers sometimes receive less scrutiny than new loans. Institutions should track approvals against authority and report exceptions.