Learning Objectives
By the end of this module, you will be able to:
Understand the Purpose of Financial Covenants
Recognise how covenants help manage credit risk and protect the lender’s position.
Understand the strategic role covenants play in loan structuring, ongoing monitoring, and early risk intervention.
Evaluate Key Financial Covenants and Their Impact
Differentiate between positive and negative covenants
Interpret key financial covenants like Debt Service Cover Ratio (DSCR), Interest Cover Ratio (ICR), Gross Leverage Ratio (GLR), and Loan Valuation Ratio (LVR)
Assess the credit risk implications of covenant breaches
Monitor and Manage Covenant Compliance
Establish effective processes for ongoing covenant monitoring using financial statements and trend analysis.
Respond to covenant breaches with practical actions such as repricing, amending facility terms, or requiring additional security or guarantees.
Integrate Non-Financial Covenants to Strengthen Risk Control
Understand the importance of non-financial covenants, such as reporting, operational, or governance requirements.
Apply them to improve transparency, protect collateral, and strengthen overall risk management.
Apply your Knowledge to Real Lending Scenarios
Practise setting and monitoring financial and non-financial covenants using real client case studies.
Use covenant performance trends to assess portfolio strength, support credit decisions, and enhance client engagement strategies.
