The Qualified Loan Review (QLR) program is a vehicle that allows financially sound depository institutions to pledge commercial loans as collateral to secure Discount Window advances, and, if applicable, Treasury Tax and Loan (TT&L) deposits. To maximize efficiency of the Reserve Bank and the pledging bank, the program relies on the institution's internal credit risk rating system to ensure that only loans of high credit quality are pledged as collateral to the Discount Window. Under the program, the Reserve Bank will accept and assign collateral values to pledged loans based on the institution's internal rating scale rather than an individual credit assessment by the Reserve Bank.

The Discount Window seeks written notification from the institution's primary regulator regarding eligibility to participate or remain in the QLR program based on team examination findings. A depository institution's qualification for the program is contingent upon the examiner's review regarding financial strength and sophistication of the candidate's internal credit risk rating system.

To qualify for the QLR program, an institution must submit copies of their credit administration procedures for evaluation.

The internal loan review system must also prove satisfactory to the institution's primary bank supervisor in order to meet QLR qualifications. Components of an acceptable loan review system include, but are not limited to:

• An independent loan review performed by qualified personnel at the institution. The internal loan review function should be independent of the lending function. The quality, effectiveness and adequacy of the loan review staff should reflect the size and complexity of the institution. Mechanisms should be in place to inform the loan review function of credit quality deterioration. The function should have the ability to follow-up with prompt corrective action when unsound conditions and practices are identified.

• The frequency and scope of the internal review process should be deemed adequate by bank supervisors. Systems for the continuous surveillance of asset quality to monitor deterioration should be in place.

Please contact the Discount Window for additional information at 1-866-226-5619.