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Dumb Questions make for Smart Bankers

In their RMA Journal article (March 2009) on ‘How Silos Obstruct Counterparty Risk Control‘, Val Mulcahy (an independent operational risk consultant) and Paul Sassieni (SVP ERM, State Street) make this statement more than once.

Beware of Table Pounders: “The credit world should discourage a culture of star performers and encourage the seemingly dumb question.”

Actively study and learn from the mistakes of others.
“An open culture that welcomes ‘dumb questions’ is a smart culture.”

Here are some examples of ‘dumb questions’ any business banker should ask:

1.  Your customer is a studio photographer but is writing off 80% of his airplane.

  • Question: “Tell me how you use the airplane in your business?”
  • Answer: “I am an aerial photographer.”

The question was a good one and resolved what should be a red flag to any lender. If you are nervous asking the borrower because you think it might be obvious, run it by a more experienced lender first. But ask! Oh, and be sure their answer makes sense.

2. Your customer has a car rental agency and you cannot find evidence in the tax return that the company owns any cars.

  • Question: “I see you are a car rental agency. Do you own the cars you rent?”
  • Answer: “No, we lease the fleet.”

You then look and find there is a significant figure in the ‘rent’ expense line of the tax return. Again, the question was a good one. And this is one a more experienced lender may have guessed at.

So here is my guess. Some of the fraud or bad credits not caught by bankers has been because someone had a question that they thought was too ‘dumb’ to ask.

Ms. Mulcahy, Mr. Sassieni and I would agree. Smart bankers ask ‘dumb’ questions. And smart banks encourage it.

What are your favorite ‘dumb’ questions?

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at, she speaks at banking associations on risk management, lending and director finance topics.