NR 2000-25
FOR IMMEDIATE RELEASE                                           
Contact: Sam Eskenazi (202) 874-5770
April 5, 2000
                                     
               OCC Offers New Handbook to Banks Engaged in 
          Accounts Receivable and Inventory Financing Activities
                                     
WASHINGTON --The Office of the Comptroller of the Currency (OCC) issued
new guidance this week to help banks understand and manage the risks
associated with accounts receivable and inventory financing activities.

The OCC's handbook, Accounts Receivable and Inventory Financing,
describes this specialized area of lending and the various forms it
takes, discusses the associated risks, and establishes OCC's
expectations for sound loan underwriting, credit administration, and
risk management practices.  

Accounts receivable and inventory financing loans allow borrowers to
leverage assets to obtain financing.  They are primarily used to provide
working capital but are also used to finance acquisitions, to
restructure debt, and to help companies through periods of distress. 
Accounts receivable and inventory loans also underlie many leveraged and
"structured" transactions.  The handbook emphasizes the importance of
underwriting, controls, and monitoring to mitigate the higher risks
associated with these types of loans.

"It is extremely important for bankers to employ proper collateral and
administrative controls in order to mitigate the higher risks associated
with this form of specialized lending," said Dave Gibbons, Deputy
Comptroller for Credit Risk.  "When prudently underwritten and properly
administered, accounts receivable and inventory finance loans often
result in lower losses relative to other forms of commercial lending. 
However, when advances against collateral are liberal or collateral is
poorly controlled, the risks in this form of financing can become
inordinate."  

The handbook also advises community bankers to ensure they fully
understand the risks associated  with accounts receivables lending
supported by computer software products purchased from third party
vendors.  Such software generally provides banks with bookkeeping
systems to manage receivables, and vendors often assist the bank in
acquiring customer accounts; however, the software cannot provide the
lending and risk management expertise necessary to supervise this high
risk activity.

The handbook also includes detailed examples of how examiners should
rate accounts receivable and inventory financing loans with various
structures.

                                  

The OCC charters, regulates and examines approximately 2,400 national banks and 58
federal  branches and agencies of foreign banks in the United States, accounting
for 57 percent of the nation's banking assets.  Its mission is to ensure a safe,
sound and competitive national banking system that supports the citizens,
communities and economy of the United States.