Have you taken the time recently to consider the benefits of your loan review? Financial institutions must continually examine their loan review processes to determine their effectiveness. A recent article from Bank Director offers some ideas for banks to consider as they assess the quality of their loan reviews.
- Don’t bank on credit quality assessments. Credit quality assessments should be considered a trailing indicator as many of these reports are not always timely or comprehensive.
- Make security a priority. If reviews are performed remotely, ensure your technology is secure so your bank is not at risk.
- Work together. Make sure your team members are working with your reviewer to prevent duplication of work and reduce errors.
- Use smart sampling procedures to soften concentrated exposure.
- Consider alternative review sources. External review sources can offer larger banks additional new ideas and approaches. Small banks should consider adding internal staff to handle the everyday issues that develop.
- Assess the strength of your loan documentation. Test it against the weakness of the risk grade.
- Consider more than cost when choosing a loan reviewer. Be sure to ask them about their procedures to ensure they provide you with information that is new and helpful to your institution.