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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Limit excess

What is a limit excess, and how does a bank handle one?

ONE OF 366 TERMS · FREE · NO SIGNUP

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

A limit excess is a drawing that takes a facility above its approved limit, whether a payment the bank chose to honour or a balance pushed over by interest and fees. Lending operations usually report excesses daily, and each one is approved by someone with the authority, returned unpaid, or cleared by the customer, often with an excess fee or a higher rate on the amount over. A one-off excess is a service; repeated ones are an early warning, and under supervisors' default definitions an overdraft that stays over its advised limit starts counting days past due.

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.

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