The Practice of Lending: A Guide to Credit Analysis and Credit Risk (Book) Review

Banking education loves to throw theory at you but here's the thing– most textbooks leave you stranded when it comes to real-world application. You graduate knowing the formulas but stumble when a small business owner walks into your office asking for a line of credit. This book bridges that gap with surgical precision.

What makes this guide different is its relentless focus on practical scenarios. Instead of drowning you in academic jargon, it walks you through actual credit decisions that happen daily in banks across the world.

The authors understand that lending isn't just about numbers– it's about reading between the lines of financial statements, understanding industry dynamics and making judgment calls that protect both the institution and the borrower.

Terence M. Yhip and Bijan M. D. Alagheband bring complementary expertise that spans both academic rigor and real-world banking experience. Yhip's career includes significant time at RBC, where he played a leading role implementing the AIRB approach as the bank became Basel II-compliant in 2010.

His background bridges practical banking with academic teaching, having served as a lecturer in International Trade and Finance at Ryerson University during the 1980s. After his banking career, he transitioned into academia as a Visiting Fellow at the University of the West Indies, teaching credit analysis and lending while engaging in public economic policy discussions.

The collaboration between Yhip and Alagheband represents a blend of institutional banking knowledge and analytical depth that's rare in lending literature.

Their approach combines expert judgment with mathematical methodologies, creating a framework that meets the Advanced Internal Risk-Based approach requirements while remaining practical for day-to-day lending decisions.

What makes their partnership effective is the balance between theoretical frameworks and battle-tested implementation strategies. They understand that credit risk assessment must work both on paper and under pressure, which explains why their book addresses everything from country analysis to management evaluation with equal precision.

The author brings decades of hands-on lending experience from both sides of the banking equation. Having worked through multiple economic cycles, they understand how credit decisions play out in real time.

Their background spans commercial lending, risk management and credit policy development at institutions ranging from community banks to major financial centers. This isn't someone writing from an ivory tower– they've seen deals go sideways and know what separates sound lending from wishful thinking.

What sets their perspective apart is the combination of practical experience with analytical rigor. They've structured complex deals, managed problem loans and built credit departments from scratch.

The writing reflects someone who has sat across from nervous business owners, navigated regulatory examinations and explained credit decisions to skeptical board members. Their approach balances the art and science of lending without falling into either extreme– they respect the numbers while understanding that context matters just as much.

Most credit risk models fall apart when you need them most. This book presents a framework that holds up under pressure. The authors break down risk assessment into digestible components without oversimplifying the complexity of modern lending. They show you how to spot red flags before they become write-offs and how to structure deals that protect everyone involved.

Generic lending advice is worthless when you're evaluating a restaurant chain versus a tech startup. The book dedicates serious space to sector-specific considerations. Manufacturing companies have different cash flow patterns than service businesses.

Seasonal businesses require different covenant structures than steady-state operations. These distinctions matter when your reputation is on the line.

Here's where most lending guides fail– they treat documentation as an afterthought. This book treats it as the foundation of sound lending. You'll learn how to structure loan agreements that anticipate problems before they happen. The legal protection strategies aren't theoretical– they're battle-tested approaches that hold up in court.

Anyone can read a cash flow statement. Not everyone can predict cash flow problems six months out. The book teaches you to read the story behind the numbers. Working capital trends, seasonal adjustments and capital expenditure timing all get the deep dive they deserve. This isn't about being pessimistic– it's about being prepared.

The authors understand that banking is fundamentally a relationship business but they don't let sentiment cloud judgment. They show you how to maintain strong client relationships while enforcing credit discipline. The balance between being helpful and being prudent runs throughout every chapter.

This book delivers what most lending education promises but rarely provides– practical wisdom you can use immediately. The writing stays grounded without dumbing down complex concepts.

If you're serious about credit analysis or managing lending risk, this guide belongs on your desk, not your shelf. It's the kind of resource that gets better with experience because you'll find yourself returning to specific sections as situations demand.

The Practice of Lending transforms abstract credit concepts into concrete decision-making tools. That transformation is exactly what separates competent lenders from exceptional ones.