5 questions that commercial lending firms ask internally

Published on January 30, 2014 by Guest Blogger

Over the last couple of months, I spent time with senior executives at commercial lending firms. The purpose was to understand what they thought were their priorities managing their credit functions in an increasingly volatile market, and amidst growing regulatory pressures. We discussed several aspects, from competition and regulatory pressures, to the uncertainties of timing, and the magnitude of the next crisis. There were a five key questions that emerged from these discussions.

The five questions that commercial lending firms ask internally

1) How can my team increase client-facing time?

Several executives mentioned that the most-discussed topic in the bank was how to make the organization more ‘client-centric’. Banks realize that the chances of winning or retaining a business are better when teams personally spend time understanding and managing client needs. The broad view is that the core team should divide their time 70:30 between clients and operations. However, the reality at most banks is the opposite.

2) Are we constantly scanning for new opportunities?

CXOs are in constant pursuit of staying ahead of peers and remaining relevant to clients. There are atleast two to three ideas debated during meetings, be it new products or new geographies. Credit teams today play an important role in foreseeing risks in new areas.

3) Can the turnaround time for underwriting be reduced?

Quicker turnaround of quotes and approvals without compromising risk elements is the key to differentiating and winning deals. Business heads are also cautious about hiring resources to manage volumes, especially given peaks and troughs.

4) Are my exposures monitored periodically, sufficiently and on time?

The second-most discussed aspect after ‘Clients’ was ‘Risk Management’. The time spent monitoring has to be justified with the magnitude of loan exposures. However, with a finite number of people to manage this task, timeliness to complete the reviews becomes fluid.

5) Do the dashboards have the right information on risk ratings?

With fluid review timelines, risk dashboards often times have dated risk ratings. While it is manageable at present, given market conditions, things may not look the same when another crisis hits.

A common theme in the minds of these CXOs is how to do more with less, which means a need to increase all-round efficiencies within their functions while managing client expectations and business risks.

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