Best Practices in Proactive Credit Portfolio Management

Regulatory expectations surrounding portfolio management continue to grow as the agencies look for evidence of enhanced proactive risk management practices in growing banks. In the latest installment of RMA’s Credit Risk Management Audio Conference Series, Peter Cherpack, EVP, Partner, Ardmore Banking Advisors Inc., and Paul Spotts, Chief Credit Officer, Orrstown Bank shared best practices and how they can improve banks’ efficiency and enable better justification for taking increased risks.

The effect of the aftermath of the economic downturn has been significant on community banks, leaving many overwhelmed with the volume and complexity of new compliance needs. As a result, new ways to manage and anticipate risk have evolved for community banks including grouping loans with like risk characteristics and tracking behavior, projecting changes in economic, market, and portfolio components, and using models and projections.

Cherpack and Spotts discussed several proactive portfolio management practices including active concentration management, stress testing, and supporting the new CECL rule. The foundation for all of these practices is quality, consistent credit data management.

Practicing proactive portfolio management and adhering to the resulting data requirements may be burdensome for banks, however, the benefits are numerous. Better available credit and risk information can increase revenue from better decision making. Increased opportunities can grow from demonstrating advanced risk management practices for regulators. Ultimately, by proactively addressing regulatory concerns, a community bank can reduce its regulatory scrutiny.

Hear Peter Cherpack speak at RMA’s Annual Risk Management Conference on November 5 during his session, CECL Implementation for Community Banks.

Join us for the next installment of the Credit Risk Management Audio Conference Series on November 13, Building a Strong Small Business Loan Portfolio and How the SBA Can Help.

Washington, The Week Ahead - June 1-5, 2020

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