CovenantPulse – Automated Covenant Monitoring

Covenant performance trends are a key indicator of changing credit risk. Most of the banks today have a decentralized system of monitoring covenants leading to a fragmented and non-standardized process. Very few banks actually validate the covenant performance and ensure the covenant backstop is valid.

Introducing COVENANTPULSE, an automated covenant monitoring managed service solution, to streamline and uplift your current monitoring process. Gain an in-depth understanding of covenant trends through dashboard reporting and stay ahead of possible deterioration in credit quality in your bank’s lending portfolio.

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  • Covenants are calculated as per the credit agreement
  • Covenant cushions and comparison with compliance certificate
  • Dashboard reporting across multiple parameters
  • Use of spreads output for automatic calculation of compliance status
  • Accommodates standard and non-standard covenants
  • Dedicated placeholder to capture observations and assumptions

Approach & Impact

  • Monitor compliance certificate & financial reports submission requirements
  • Track applicable covenants at the end of each reporting period
  • Calculate covenants based on definitions provided in the loan agreement
  • Compare the calculated number with required threshold as per the loan agreement
  • Validate covenant calculations provided in the compliance certificate
  • Reporting of whether covenants were met/not met
  • Strengthening the credit risk governance practice
  • Monitor and validate 100% of covenants
  • Drive 30%-40% efficiency improvement in covenant monitoring process
  • Introduce a standardized approach to the monitoring process
  • Robust and insightful dashboards for the bank’s senior risk management team
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