By John Lankenau
Each year the financial industry spends billions of dollars on technology to keep up with evolving business needs and regulatory mandates. However, despite this significant investment, financial institutions suffer from three fundamental technology gaps when it comes to accounting for and managing their loans.
- Tackling the divide between loan servicing systems and the general ledger – Servicing systems cover the “cash view” of a loan while the general ledger covers the “accounting view.” In recent years, these two views have diverged. This gap has much to do with data, but can’t be solved by just a data warehouse or intelligent data architecture. The gap also has much to do with accounting calculations, but can’t be solved by an accounting system alone. What’s needed is a system that lives between the raw sources of data and the general ledger that can bridge the gap seamlessly – both today and in the future.
- Addressing the disconnect between the modelers and users of loan risk models – To effectively fix this issue, use an integrated model execution platform that can host various types of models across all asset classes to forecast income and losses in an integrated and controlled manner. As of now, very few institutions have implemented this best practice.
- Filling the hole between relationship managers for commercial credits and risk management -In order to fill this gap, institutions need a system that gathers information in a structured manner and integrates the information into the institution’s data architecture and analytical framework. The system also needs to include a workflow component, allowing for secondary reviews and approvals up the institution’s organizational structure.
In our most recent white paper, Mind the gap – what are the technology gaps facing financial institutions, we dive into more detail about gaps in loan management and critical ways to bridge them.