HEIGHTENED RISK MANAGEMENT FOR CRE PORTFOLIOS
"Community banks, by definition, are going to be concentrated...We have been refocusing our conversations around concentration to discuss the strength of those credits."
Doreen Eberly, Director of the Division of Risk Management Supervision, FDIC March 8, 2016
While regulators acknowledge that the 300% concentration is a guidance, banks must maintain stronger risk management processes if they plan to go beyond concentration thresholds preferred by regulators. Interested in seeing how your portfolio stacks up in an economic downturn? Want to stress geographical and property/collateral specific factors? LONOS makes this easy, providing you the tools to stress test at the individual loan level and at the portfolio level in order to operate a safe and sound manner while maintaining higher aggregate concentration levels.
FinPro has many clients who have loan portfolio concentrations above 300% who have recently undergone safety and soundness examinations without criticism. Given market availability, higher yields, and underwriting expertise, it often makes sense for an institution to have concentrations. Preparedness and communication are they keys. Working with FinPro's advanced analytics team and staff of former senior regulators, clients' modeling and processes effectively combine strategic planning with heightened risk management practices that satisfy regulatory expectations.
FinPro has many clients who have loan portfolio concentrations above 300% who have recently undergone safety and soundness examinations without criticism. Given market availability, higher yields, and underwriting expertise, it often makes sense for an institution to have concentrations. Preparedness and communication are they keys. Working with FinPro's advanced analytics team and staff of former senior regulators, clients' modeling and processes effectively combine strategic planning with heightened risk management practices that satisfy regulatory expectations.
- IDENTIFY - Analyze the true risk based on a detailed analysis of the bank’s oversite, portfolio management, MIS, market analysis, credit standards, and risk review functions.
- MEASURE - Quantify the exposure through detailed segmentation analysis, stress testing, and sensitivity analysis.
- MONITOR - Integrate the reporting process with the bank’s existing internal risk management (ERM) process.
- CONTROL - Utilize LONOS in underwriting to digitally centralize the analysis of CRE data, streamline underwriting efficiency, ensure quality in credit process, automate policy adherence, track loan authority, and analyze the strength of both individual credits and the entire portfolio.
