Pub. 2 2021 Issue 6

cbak.com 12 In Touch S taffing concerns and getting the necessary data are financial institutions’ biggest challenges when it comes to performing loan reviews, according to a new survey by Abrigo. Among 115 people from banks, credit unions, and other organizations surveyed about the loan review function, 37% named getting the necessary data as the top challenge. Almost one in every four respondents identified inappropriate staffing as their financial institution’s biggest loan review obstacle. A poorly defined scope of review (12%), lack of independence (6%), and lack of commitment from senior management (3%) were less prominent challenges in the loan review process for respondents in Abrigo’s survey. Effective loan review begins with good data Effective loan review has always been critical for managing a financial institution’s credit risk as part of ensuring its safety and soundness. Uncertainty related to the coronavirus pandemic highlighted the importance of identifying loans with actual or potential credit weaknesses as early as possible. In addition, updated guidance on loan and credit risk review in 2020 emphasized the importance of independent loan review or credit review systems that are tailored to institutions’ specific risks and circumstances. However, loan reviews can only be as accurate as the information used for the review. And as the survey showed, getting the necessary data can be difficult for many financial institutions. Loan reviewers require accurate information at the loan level, which, at many institutions, might be located in multiple systems: • the core • a third-party origination system • Excel spreadsheets • even paper files for some documents related to collateral. More lenders automating loan review function Getting consistent and accurate data can be complicated and laborious when stovepipe systems and manual processes Loan Review Challenges: Survey Finds Data, Staffing Among Top Obstacles BY MARY ELLEN BIERY, ABRIGO A s s o c i a t e M e m b e r How is the loan reviews function organized at your financial institution? How does your financial institution determine which credits will be examined? (Select all that apply.)