Facing pressure from regulators to improve loan portfolio monitoring, the corporate banking division of a top 10 North American bank partnered with Evalueserve to establish a credit review process. Through a combination of domain expertise and technology accelerators, Evalueserve manages the credit review process for the entire wholesale lending book, meeting regulatory requirements, mitigating risks, and saving significant time.
The Challenge
The Corporate Banking Division of a Top 10 North American Bank was under pressure from regulators to increase the monitoring of its borrowers. The bank lacked a standard credit interim review process, and needed to create and execute a model that would enable them to closely monitor their wholesale lending book to appease regulators and mitigate risk.
As a trusted partner of the client’s investment banking group, Evalueserve was brought in to consult with the Managing Director of Credit Management on the project. Given our strong expertise in the corporate banking domain, data analytics capabilities, and technology-enhanced services approach, Evalueserve was selected to help the client develop an efficient, accurate review process that would meet regulatory needs.
Our Approach
Diagnose
The client needed domain experts with a deep understanding of their workflows to help develop a credit review model. We started the engagement with client workshops to understand their current credit review tasks. Through these workshops, we identified gaps where new activities were needed and existing processes that could be made more efficient.
Beyond creating the review model, the client also needed support in executing it. They required assistance in processing the vast amount of structured and unstructured data for their portfolio of 1000+ companies. This included financial spreading on the model, calculating key financial ratios, providing brief write-ups on the companies' financial performance, validating covenant compliance, conducting external rating analysis, running necessary risk assessments, and highlighting any visible early warning triggers.
Design
In designing our solution, Evalueserve worked with both the first and second lines of defense to ensure regulatory requirements would be met. In partnership with the bank's risk function, we developed a comprehensive credit review model.
Evalueserve then helped the corporate banking team execute the model with a combination of expert services enhanced by dashboarding support for structured monitoring. We put together a specialized team of 29 cross-functional experts organized by sector expertise.
We took over management of the entire process for the US team, then expanded to support the corporate banking team in Canada.
Deliver
The credit review model addressed major gaps in the bank’s current process, including monitoring quarterly credit performance, early warning triggers (EWT’s) tracking, and covenant compliance validation of the wholesale lending book.
The credit review process consisted of several key tasks, including:
- financial spreading,
- adjusted EBITDA calculation,
- credit metrics calculation,
- peer comparison,
- early warning trigger identification & tracking,
- external rating commentary,
- liquidity and leverage analysis,
- operating performance analysis,
- and covenant compliance validation.
Sectors covered included Energy & Power, Real Estate, Utilities, Automotive and Industrial Packaging, Industrials, Healthcare, and Consumer Retail, totaling around 1,000 portfolio companies.
To further boost the efficiency of the bank’s processes, Evalueserve’s experts developed a VBA and python-based tool to automate the consolidation of funds borrowing base sheets and complex indirect exposure calculations for real-time portfolio exposure monitoring. The dashboarding solution also provides logical data filtration and auto-generated diagrams for reporting and risk assessment to help make critical business decisions.
In working closely with the client as part of our ongoing partnership, we have identified another area for improvement. Given lack of a centralized view of the complete corporate lending book, Evalueserve has developed a dashboard for monitoring the health of approximately 1,000 corporate borrowers. We are in discussion with the client to deliver the dashboard, which will facilitate risk-based assessments and trend analyses, offering actionable insights for strategic discussions and credit risk mitigation.
"As an institution, we have been working with Evalueserve for a long time across other teams, and that seemed like a natural place to start a dialog. We found the team at Evalueserve had already thought of several of the issues we were thinking through based on their experiences with other banks. From there it was really an easy choice to proceed with Evalueserve." - Managing Director
Business Impact
Evalueserve’s partnership helped the corporate banking team improve their portfolio monitoring to meet regulatory requirements and keep a close watch on any early warning triggers. By working with the banks first and second lines of defense, we were able to collaboratively develop a credit review model that would ensure compliance and mitigate risk.
Our ongoing management of the time-consuming credit review process enables credit managers to focus on value-adding task, such as generating new business. By combining our expert services with technology accelerators, we delivered 70% time savings, eliminated human errors, and delivered a centralized view of the entire portfolio for senior stakeholders and regulators, enabling better decision making.
To learn more about how we work with Corporate Banking teams, check our our webpage.
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Overview & Impact
Evalueserve partnered with a leading North American bank to establish a credit review process for their entire wholesale lending book, meeting regulatory requirements and mitigating risks.