Credit (Risk) Analyst

The Current Ratio, ROE, ROA, Debt/Capital, Debt/Equity, and Interest Coverage Ratio.

This is a good time to highlight specific accounting, corporate finance, and financial research expertise. If you’ve worked with the products the firm has traded, make sure to work it into the conversation a number of times. Basel II implementation experience is also a selling point. Problem solving skills are a major requirement for the job, so be prepared to discuss them.

As a credit analyst, you will be better off if you have expertise and experience with computer software and programming. You first want to cover you deep knowledge of PFE, CVaR and VAR analysis tools. These are the most widely used software. Additionally, mention any proficiency with MATLAB, C++, SQL, VB/VBA, SAS and Moody’s KMV. If you are familiar with any other programs or languages, share this with your interviewer so he or she can get a better idea of what you could do for the company.

The more technical expertise and programming experience you have, the better off you will be. You should first prove to your interviewer that you have a strong understanding of PFE, CVaR and VAR analysis tools. These are the ones that are most commonly used, so a strong understanding of all of them is critical. Similarly, if you have programming experience, you are much more likely to be hired. Tell your interviewer if you are proficient with C++, MATLAB, SAS, SQL, VB/VBA and Moody’s KMV. The more of these you understand, the better off you will be and the more likely that your interviewer will be impressed with your abilities.

Professionals are typically required to use specialized software to perform things like generating financial ratios and developing statistical models to assess and predict information. Mentioning your ability to use computers in general for related activities such as market research is also relevant.

☛ What experience do you have in a credit control role?

☛ How would you deal with a client who was refusing to pay?

☛ What are your interpersonal skills like?

☛ How would you address a difficult subject with a customer?

☛ How effective are you in negotiation situations?

☛ How would you handle a customer forcefully disagreeing with your decision?

☛ How would you feel about rejecting or sanctioning desperate customers?

☛ Are you a good team player?

☛ Do you have any credit management qualifications?

☛ Would you be willing to work overtime during busy periods?

☛ How does a balance sheet or cash flow statement help you in determining credit risk?

☛ Walk me through the process of determining whether we should loan $5 million to a company

☛ If an important long-time customer applied for a loan, but after your analysis you found the risk was too high, how would you handle it?

☛ Imagine one of the company’s salespeople strongly wants to acquire a particular customer, but you’ve found their creditworthiness is lacking. How do you resolve this?

☛ Tell me about a time your judgement on a case was proven incorrect. What should you have done differently?

☛ Recall a time you used your communication skills to resolve an issue at work

☛ Tell me about a time you developed an effective method or model to assess profitability

☛ What’s your quantitative analysis experience?

☛ What financial software have you used in the past?

☛ Which financial ratios do you use more often? Which is the most important and why?

☛ What types of customers have you dealt with in the past?

☛ Can you explain the meaning of Credit Default Swap (CDS)?

☛ What’s different with Basel III?

☛ Do you like working in a team?

Credit analysts work hand-in-hand with traders, bank management, risk specialists and/or IT people. So, it’s a given that you’ll need to be a people person, a team player, and a go-getter. For instance, you’ll need to demonstrate how you can effectively deal with the inherent challenges of a trading environment. If you have specific examples of management experience, this is the time to emphasize them.

Review all three financial statements for the past five years and perform a financial analysis. Determine what assets can be used as collateral, how much cash flow there is, and what the trends of the business are. Then look at metrics like debt to capital, debt to EBITDA, and interest coverage. If all of these metrics are within the bank’s parameters it may be possible to lend the money, but will still depend on qualitative factors as well.

A bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities. Owners of bonds are debtholders, or creditors, of the issuer.

A recession is a significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP), although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.

In order to be a successful credit analyst, it is important that you are proficient in financial analysis, as well. Your interviewer may ask you if you understand things such as cash-flow and other financial statements, income growth, market shares and much more. You may also be asked if you can correctly calculate debt to income ratios in order to discover a client’s dispensable income. All of this information is necessary for developing a client’s credit portfolio. You can answer with “I am very familiar with using various tools and methods to perform financial analyses. I am capable of determining a client’s credit situation quickly and accurately.”

It may sound obvious, but it must be stressed: analytical thinking is vital to one’s success as a credit analyst. Professionals in this field do a lot of evaluating; they study customer records, meet clients in person, and become familiar with their history and habits. Analysts must be able to put all these together and decide if it is productive for the company to extend credit in this case.

Rating agencies are supposed to help provide trust and confidence in financial markets by rating borrowers on their creditworthiness of outstanding debt obligations. They can, however, run into conflicts of interest and cannot be blindly relied on for assessing a borrower’s risk profile.

A commodity is a basic good used in commerce that is interchangeable with other commodities of the same type; commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade.