Independent Loan Review: 3 Advantages for Financial Institutions – Video
Gain an Edge with Loan Review Function
An independent loan review process helps financial institutions achieve growth goals and win over competitors, Consultant Ancin Cooley explains in this video.
You might also like this webinar: "Create & Maintain a Successful Loan Review Function"
Historically, loan review might be viewed as the “fly in the ointment” or the strict parent by lenders with their sights set on growing earning assets. In fact, the loan review officer might be someone bankers have dreaded, either coming in or even passing by their office, says Ancin Cooley, a former examiner with the Office of Comptroller of the Currency (OCC) and now the principal of consulting firms Synergy Bank Consulting and Synergy Credit Union Consulting.
But an independent loan review system or process is actually a financial institution’s competitive advantage, according to Cooley, who is leading webinars for Abrigo on loan review for banks and loan review for credit unions. Loan review is important for the overall health of the bank or credit union. In addition, it paves the way for gains over your peers, primarily in the following three ways, Cooley says.
Watch the video above, a preview of the webinars, or continue reading to learn more.
Provides confidence to grow
Cooley says that with effective, independent loan review process, a financial institution can move faster and further with confidence.
“Imagine you’re a growing institution that wants to do C&I, CRE, and you have a high appetite for risk,” he says. “But you’re a CEO that’s been losing a lot of sleep because of some of the underwriting you’ve been seeing coming across your desk during loan committee. Loan review can give you the confidence you need to feel good that those loans are healthy and are going to do what they need to do for your institution.”
To have full confidence in the loans, however, the loan review function needs to be independent. “Not reporting to you, not reporting to the chief loan officer, not reporting to the chief risk officer, because if that individual or that function is not independent, you may not be getting the fullness of what they have to communicate to you.”
Helps avoid regulatory woes
A loan review function that is independent has another benefit that provides banks and credit unions an advantage over peers, Cooley says.
“It alerts you to weaknesses in your portfolio and gives you an opportunity to correct them before regulators come in,” he says. “Ideally, your loan review should operate like a radar, going out and touching the portfolio, constantly scanning, and looking for weaknesses.”
When a loan reviewer finds weaknesses, they can dive in and make recommendations before examiners come in. And that will give your financial institution a competitive advantage because it allows you to stay on your growth trajectory rather than having to spend time on addressing regulators’ concerns.