Risk Assessments

Hello,

Our financial institution is looking to further enhance our assessments as we are moving our vendor management program over to Venminder. What are some good credit / interest rate questions (and residual questions) other financial institutions are asking during the initial assessment? 

Hi there!

Below are some ideas and thoughts to incorporate within your initial assessments related to credit and interest rate risk (specifically, if you are dealing with lenders / lending, consider some of the high-level items below in items 4-10 that can be expanded upon through your own program if lending / origination is part of the due diligence):

1) How much cash and liquidity do you currently have on your balance sheet?

2) Do you have enough liquidity to sustain operations for at least the next 18 months?

3) Please provide an income statement and detail on your profitability for the last 24-36 months, including details on gross and net lending

4) Please provide details for your collateral management process, including the organizational team members and staff dedicated to it

5) Do you have any plans to purchase any loan portfolios of any other third-party lenders? If so, please provide details on your due diligence on such purchases considered or made

6) Please provide overview and details on your underwriting policies and procedures

7) What models / scorecards / methods are used to make credit decisions? How often are these reviewed and adjusted by your organization?

8) Please provide overview and details on your corporate lending policies and procedures

9) Please outline the customer due diligence process or checks taken on borrowers prior to a lending decision, including anti-fraud, anti-money laundering and know-your-customer diligence

10) Please provide an overview and details on your valuation policies in place at time of loan / credit origination and valuation methods used 
 
Other helpful content is available on the public domain, such as
1) direct guidance from the NCUA here: https://ncua.gov/regulation-supervision/letters-credit-unions-other-guidance/indirect-lending-and-appropriate-due-diligence,

2) OCC here: https://www.occ.gov/news-issuances/bulletins/2020/bulletin-2020-81.html 

3) as well as some references on how to perform due diligence on fintechs (if relevant to some of your vendors) from the FDIC here: https://www.fdic.gov/news/press-releases/2021/pr21075a.pdf

Hope these help!