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Banking Industry Solutions

Loan Loss Management System

When the loans sanctioned to the borrowers are not repaid as agreed at the time of sanction, these loans are classified as non-performing loans or impaired loans in the books of Banks. The topic of Non-Performing Loans has climbed quickly to the top of the agenda in the world’s financial institutions in the last few years.

Business Challenges

Today, Banks want to have a separate system for loan loss information due to the following reasons.

  • The rules of Basel II focus on off-loading impaired loans from the Bank’s balance sheet.
  • Until now, impaired loans managers have been obliged to rely on spreadsheets for valuation, analysis and asset organization. However, spreadsheets are unwieldy, slow, and highly prone to error and cannot accept multi-input updates, especially for the complexity of portfolio valuations and transaction where cash flows are no longer present.
  • The Banks are also frequently dependent on one or two employees who are conversant with loan loss provisioning.
  • No consistent record for loan loss information
  • Need to record covenant breaches. I.e., loans where partial payments are still flowing. Technical default due to a covenant break, such as breach of limits on Debt-Coverage (DSCR) or Loan-to-Value (LTV) ratios is often a precursor to complete payment default.