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How to manage the growing risks in lending transactions

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Growth in the lending market is leading banks to complete thousands more transactions each year, significantly increasing the risks associated with processing these deals. As a team at a leading bank, you need more controls and processes to minimize these risks.

Manually entering loan details into proprietary systems often leads to banks’ operational teams entering inaccurate credit information compared to what was underwritten.

This results in leaking profits, poor customer service, and reputational damage. It also increases credit, underwriting and regulatory risks.

What creates these substantial risks?

Inaccuracies are typically caused by complicated credit agreements; technological complexity; lack of consistent operations training; employee turnover; and labour shortages.

Nuances in loan documents – such as with multi-lender facilities, letters of credit, leveraged deals, and asset-backed loans – also create an extra layer of complex documentation.

These need to be reviewed to ensure the legal information is documented thoroughly and interpreted correctly.

Other common examples include incorrect data reported on bank systems – such as maturity and origination dates, commitment amounts, and interest rates based on the pricing grid. Our team has also seen instances where documentation is not provided to support reported information.

When you need to meet federal reporting requirements, but such internal controls fail, this creates substantial risk for your organization.

How to mitigate the risks

As a leading bank, you need a team that can tackle these problems by enabling quality control functions, and providing an independent party with proper controls and visibility into your loan setup process.

For example, Delta Capita’s team based in Dallas, Texas, can help by providing a detailed review of credit documents and comparing them to the operational lending systems.

The team facilitates due diligence at deal and facility levels. It also provides confidence that the link between underwriting and loan operations services is strong and has multi-layer controls.

How Delta Capita can help

Our Dallas team understands legal loan documentation, deal structure, and loan and funding mechanics. We can help you build out facilities in the end-to-end loan cycle operating system. Delta Capita also have the global reach in the lending market to ensure data integrity, accurate reporting, and exceptional service for large international organizations.

As a lending team, you need to focus on mitigating risk and operational quality control to optimize your processes. This helps preserve and enhance your firm’s assets and reputation. Delta Capita’s Dallas team provides extensive knowledge and expertise in the banking and capital markets sectors to help you minimize the risks in your daily transactions.

To find out more, contact us today and speak to one of our experts.