Measuring Loan-Portfolio Credit Quality

Update and manage loan documents

Once a loan is booked and distributed to a loan officer, consistency in management, tracking, and updating important documents and covenants is critical. A common indicator of future credit risk is a borrower's failure to submit updated financials. Centralizing processes for tracking these, and other critical loan documents, through an automated software solution provides standard practices, improves efficiency, and reduces the likelihood of human error. For example, many institutions use a tickler system to request updated tax returns for borrowers. An automated system providing a global view of borrowers can ensure only one request for the updated return is sent to a borrower with multiple personal and business loans, and it can generate exception reports automatically.

Improve the stress testing process

Stress testing is a tool to generate a more complete picture of the institution’s credit risk profile and to control the risk. Many institutions hear "stress test" and think, "That’s not me, because I’m not required to under Dodd-Frank or because I don’t have a concentration in commercial real estate or construction." The reality is that stress testing is a best practice to proactively manage risk within your portfolio. In addition, using an effective stress test is also an excellent way to forecast issues that may impact your allowance as well as your capital ratios.