Lending is a key business activity in the financial services sector. The loan portfolio is one of the largest assets and a chief source of revenue for banks, but is also a great source of risk to a bank’s safety and soundness. Whether due to lenient credit standards, poor portfolio risk management, or weaknesses in the economy, loan portfolio problems have historically been among the major cause of financial institutions’ losses and failures.
While annual audits of loan portfolios may address these risks, time has revealed that continuous monitoring is the most efficient approach. Identifying control breaches, anomalies and high-risk activities at an early stage and employing a firm remediation strategy often prevents – and certainly minimizes – the impact of any potential portfolio impairment.
CaseWare™ Analytics Loan Portfolio Monitoring
The CaseWare™ Analytics platform automates the definition of governance, risk and controls within a financial institution's lending process. The financial institution can then define the control environment from loan origination to servicing and portfolio management. Continuous monitoring of the loan portfolio allows stakeholders to quickly determine, by review of electronic records, any activities or conditions that require attention before they become problems.
- Better Risk Management
Immediately detect anomalies and errors that are not in accordance with company or regulatory policies as they relate to approval limits, schedules, refinancing, delinquencies, etc.
- Proactive Management of the Portfolio
Quickly recognize loans in arrears or improper disbursements to prevent a negative impact on the balance sheet.
- Disbursement and original loan amount varies
- Loan disbursement date and loan start date differs
- Loans without schedules or incorrect schedules
- Policy variations at origin – rates, term, principal, fees, penalties, moratorium, etc.
- Service charges differ and other charges differ from policy
- Loan approval limits exceeded
- Collateral information missing/incomplete
- Potential duplicated disbursement
- Changes to schedules and customer records
- Principal repayments consistently different from schedule
- Payments applied incorrectly
- Delinquency analysis/reports
- Loans written off but not according to policy
- Policy variations at servicing – rates, term, principal, fees, penalties, moratorium, etc.
- Suspicious rescheduling, write-offs or refinancing
- New loan disbursed to customer with overdue loans
- Ex-employees still receiving employee loan terms
- Loan classifications inconsistent/inaccurate
- Segregation of duties violations — approval, disbursement, adjustments, scheduling, etc.
- Know your customer (KYC) violation
- G/L entries incorrect
- Loan Officer performance reports
- Loan security margin below policy
- Aged portfolio at risk (PAR) and repayment rates (RR)
- Expected maturities within period