Ensuring Consistent and Effective Credit Decision Making
Inconsistent or unreliable approaches to credit analysis expose banks to unnecessary risk. This problem often occurs in bank mergers that combine diverse credit practices. It is compounded by hiring experienced lenders from other institutions that do not share a common methodology for analyzing credit risks.
Further, inefficiencies in analysis and the approval process often exist because of inappropriate analytical techniques or failure to understand the underlying reasons for the loan request. Using the right tools for the job is crucial.
A Best Practice Approach
Top-performing banks ensure consistent and effective credit decision-making by applying a systematic framework to thinking through a credit decision. The successful approach is more than a step-by-step checklist. Lenders need to think about risk analysis as a process that begins with identifying the opportunity, and continues through repayment analysis, loan management and risk monitoring.
High performing lenders translate these practices into institutional norms; the most successful institutions adhere consistently to specific patterns to perform credit analysis. The rigorous application of “decision strategy” provides management with the peace of mind of using a consistent framework to think about risk analysis as a comprehensive process.
Institutions recognized for sound credit practices typically employ a disciplined and systematic approach to assess risk, make sound credit decisions and manage credit relationships. Omega Performance’s Decision StrategyTM is recognized as an industry standard for such analysis. The following steps provide analytical insights that inform and focus subsequent analysis on the highest priority risk factors: