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Trends in Commercial Loan Portfolio Risk Management

Risk Management Systems Support

In today’s increasingly complex financial world, banks involved in commercial lending or commercial loan risk management need to regularly reassess whether their processes and systems adequately provide the support and control that they need.  Lenders need to be able to assess at a moment’s a multitude of issues with the ability to take management action, such as:

  • Documentation of lending authority by individual and/or group  
  • Lending levels, limits, limit compliance and controls
  • Lending activity by product type, business type, loan type or loan size.
  • Geographic distribution of lending so that the needs of the community are met within the risk standards established by your organization.
  • Current customer financial information including current financial statements, tax returns, credit reports.
  • Collateral value in relation to exposure.
  • Maintenance of collateral coverage requirements such that assets held as collateral are adequate.
  • Guidelines for loan participations and reporting aggregate participations related to specific borrowers, categories, geographic areas and lead originators.
  • Off balance sheet items including committed but undisbursed loans, letters of credit or issues of securitized instruments have become a more serious issue as the markets have changed.

Commercial loan portfolio risk management has become a more complex problem for managers especially as regulations have increased over the last decade, making your job more difficult.   Risk management has become an activity that requires solid technical help.  A well thought out business process and software solution can make your job easier and more effective.