PART A · QUESTION 1
A new starter asks why the bank will not pay out until every item on a list is ticked, when the credit committee has already approved the loan.
// EXAM HALL22 QUESTIONS · 30 MINUTES
Lending Operations Practice Test
An approval is not yet a loan: what stops the money at 3pm, who can waive it, and what to do when the file does not match.
BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
A lending operations practice test asks whether you can turn an approval into a working facility, and hold the line when someone needs it settled today. This paper has three parts: conditions precedent, day counts, priority and repayment schedules; a settlement file set on an exhibit, with a prior mortgage, a transposed margin and a limit that does not match; and calls on second checks, payment fraud, releasing security and owning an error. Every question is original, and none comes from any bank's test. Sit it against a thirty-minute clock, or take it as practice.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
// HOW TO SIT IT
Answer below as practice, and each read opens as you go. Or sit it as a test: 30 minutes, with every read held back until you finish.
PART A
The basics
What an approval still needs, and the sums the system has to get right.
PART A · QUESTION 2
A food manufacturer's loan is secured by a floating charge over its stock and debtors and a fixed charge over its factory.
Which security can shrink without anyone breaching anything?
PART A · QUESTION 3
US$2.5m at 6.5% a year. The agreement counts actual days over a 365-day year. The first interest period is 30 days.
How much interest falls due?
PART A · QUESTION 4
Two mortgages over one property. The bank's US$2.0m was signed first and registered second. Another lender's US$1.0m was signed later and registered first. The property sells for US$2.2m after costs.
What does the bank receive, if priority follows registration?
PART A · QUESTION 5
A US$2.5m loan repays US$125,000 of principal each quarter. Two years have passed, and every payment has been made.
What principal should the system show as owing?
PART B
The settlement file
One file, nine questions, five hours. Read what was approved against what is on file.
EXHIBIT AG · THE SETTLEMENT FILE
A five-year term loan to buy a warehouse for US$3,300,000. It is 10am, settlement is at 3pm, and the relationship manager has rung twice.
| Item | Credit approved | On file |
|---|---|---|
| Borrower | Company number ending 4471 | Facility agreement: number ending 4417 |
| Loan | US$2,500,000 | Agreement: US$2,500,000. System limit: US$2,750,000 |
| Margin | 2.40% | Signed agreement: 2.04% |
| Deposit | US$800,000 from the borrower | Bank statement: US$550,000 |
| Mortgage | First mortgage over the warehouse | Signed. The title search shows the seller's finance company's mortgage. Its discharge is promised “by email this afternoon”; no payout figure or undertaking is on file |
| General security | Over all assets | Signed, not yet registered |
| Guarantee | Both directors | One signed. The other is overseas until Friday |
| Insurance | Bank's interest noted | Client's business policy, extended to the warehouse. Expires in six days. Bank's interest not noted |
| Valuation | Current, addressed to the bank | Five months old, addressed to the borrower |
PART B · QUESTION 6
It is 10am on Exhibit AG. Settlement is at 3pm, and several items are open.
Which do you chase first?
PART B · QUESTION 7
Exhibit AG's relationship manager rings: 'The discharge is a formality, and settlement cannot move. Pay out now, and we will have it tomorrow.'
What do you do?
PART B · QUESTION 8
From Exhibit AG: the margin in the signed agreement, against the one credit approved.
What is the difference worth on the US$2.5m, in the first year?
PART B · QUESTION 9
The agreement in Exhibit AG reads 2.04%, and it has been signed. The relationship manager says: 'Load 2.40% in the system. That is what credit approved.'
What do you do?
PART B · QUESTION 10
From Exhibit AG: the deposit on the bank statement and the limit in the system, each against the approval.
Signal or noise?
PART B · QUESTION 11
Exhibit AG's general security has not been registered yet. The agreement shows a company number ending 4417. The approval shows 4471.
What do you do before registering?
PART B · QUESTION 12
Exhibit AG's valuation is five months old and addressed to the borrower. Credit's condition was a current valuation, addressed to the bank.
Why does the addressee matter?
PART B · QUESTION 13
Exhibit AG's building insurance expires in six days, and the bank's interest is not noted on it. The client says: 'My broker renews it every year.'
What do you do?
PART B · QUESTION 14
Exhibit AG's second guarantor is overseas until Friday. The banker says: 'They can sign a scan this morning and email it. We can settle on that.'
What do you do?
PART C
The calls
Unglamorous and unforgiving: the error is found when the bank needs the security.
PART C · QUESTION 15
It is month end, with 40 files in the queue. Your checker suggests dropping the second check on anything under US$100,000, just this week.
What do you do?
PART C · QUESTION 16
On the morning of settlement, an email from the client's lawyer gives a new bank account for the funds. The address and the letterhead look right.
Signal or noise?
PART C · QUESTION 17
A client repays its term loan, and the relationship manager asks for the mortgage to be released today. The loan system shows a zero balance.
What do you check first?
PART C · QUESTION 18
An annual check of the security register finds three of 200 files whose mortgage documents cannot be found. The system shows them as held.
Signal or noise?
PART C · QUESTION 19
You notice that a loan you settled last month is missing a condition. You ticked it yourself in error. Nobody has noticed, and the borrower is fine.
What do you do?
PART C · QUESTION 20
A revolving facility's review date passed three weeks ago. The system still lets the client draw, and the client has just drawn. The banker says: 'Just roll the date, the review is nearly done.'
What do you do?
PART C · QUESTION 21
A signed certificate shows leverage of 3.6 times against a 3.5 times covenant. The relationship manager has written on it: 'Client will fix this next quarter. File as usual.'
What do you do?
PART C · QUESTION 22
Every condition on a file is met. The mortgage gives the address as '14 Mill Rd', and the valuation says '14 Mill Road'. The title reference, the borrower and the amount all match.
Signal or noise?
0 OF 22 ANSWERED · 0 WITH THE SENIOR READ · 0 STANDS UP · 0 OFF THE LINE
// THE REST OF THE ROUND
Every question here is original; none is any bank's real test. Written for: Lending operations officer.
- Lending operations officer: the interview questions, against a two-minute clock.
- Situational judgement, for any seat.
- The assessment centre: a whole case in forty-five minutes.
// SUBSCRIBE
The Lab.
One case file and one question, in your inbox every Tuesday morning, New Zealand time. The senior banker's read opens only after you answer.
FREE WITH IT · 10-PAGE PDF
Case 01 of the interview case pack — Northmark Engineering, in full.
No spam. Unsubscribe anytime. Educational content only.