First National Federal Bank Case Study Example | Topics and Well Written Essays - 1500 words - 2

First National Federal Bank - Case Study Example In business today, the old adage about honesty is the best policy still holds true and it is more important than ever. Problem – this case deals with an ethical issue regarding the business practices of the First National Federal Bank located in the state of Wyoming. Loan officers are now required by the bank to adhere to changes implemented after the savings and loan debacle with regard in particular to ethical business practices. This emphasis on ethics is to avoid those problems that arose due to unsavory policies and procedures concerning the approval of bank loans. In this particular case, the issue at hand is whether to let a loan applicant pay for the cost of the officers out of town trip purposely to inspect the hard collateral offered by a client for his loan. It is a standard practice in the banking industry to require collaterals in exchange for a loan. A bank requires collateral as a guarantee for repayment because a loan client would rather not be in a position of abandoning his hard-earned collateral and lose it through foreclosure if a loan turns sour (bad). There is also ambigu ity between what is legal and what is ethical (moral). Inputs - the issue that bothered Shelby Grant the most was the question of whether to let one of their potential loan clients (Mr. Doug Whitton) pay for their trip to a ranch he owns as part of the bank's due diligence process of conducting an on-site evaluation (appraisal) of the offered collateral. At this point, it may seem unethical to let a client shoulder the expenses since there is no assurance the loan would be granted. Besides the collateral, there are factors that may work against loan approval such as credit history and repayment capacity (source of income to pay back the loan). If the two loan officers, Shelby Grant and Ben Garrison, would allow or accept the clients offer to pay for their trip, it may appear a bit awkward for them.