A financial institution may have an excellent policy, but if the loans in its portfolio don’t align with the parameters in its policy, internal miscommunication is likely the culprit. Include all stakeholders when reviewing and making changes to your policy to ensure everyone is on the same page—especially lenders, who must understand what your institution is willing to accept.
Implementation documents and procedure manuals can help establish parameters for your institution. Make sure it includes all necessary steps to carry out your policies, and that staff roles are clearly defined. Your institution should also monitor its operations by comparing loan policy to recent originations through loan reviews, checking that staff is adhering to your policy with minimal exceptions. During examinations, regulators pick a sample of loans to compare with your policy, so it is wise to make sure your institution’s loans are up to code.
A third consideration is to check that your policy is applied, where appropriate, on a consolidated institution basis. This means that all branches and offices are applying your policy and procedures consistently, especially for consumer lending. Rather than an annual tickler, review the policy quarterly, and revise it to account for growth expectations, competitive factors, economic conditions, staff expertise, and level of capital across your institution’s offices.