CCIB Portfolio management is key

Commercial, Corporate and Institutional Banking Credit Portfolio Management

Today’s Commercial, Corporate and Institutional Relationship & Portfolio Managers really need to be on top of their game, managing portfolio’s that may span the major families of transactions that generate credit risk for banks.

Commercial, Corporate and Institutional Relationship & Portfolio Managers deal with complex and challenging risks environments that range from the most common source of credit risk for banks, which includes issuing loans, credit lines, and other forms of credit; to activities, such as buying and selling financial instruments such as bonds, derivatives, and foreign exchange; taking on credit risk through underwriting activities, such as issuing and selling securities like stocks and bonds; settlement and clearing trades and the clearing of payment and securities transactions; accepting deposits, and providing cash management services and providing guarantees, such as letters of credit, to support customers transactions.

Risk Families

Each family of transactions requires different risk management techniques. It’s important for Commercial, Corporate and Institutional banks to have the skilled and knowledgable Relation and Client Portfolio Managers, both equipped with the skills, systems and processes in place to identify and manage the credit risk associated with each type of transaction.

Costly mistakes

This becomes particularly important when banks engage in non-standard credit-related activities that go beyond traditional lending and borrowing and may involve additional risk such as securitisation, which is the process of pooling together a group of assets, such as mortgages or credit card receivables, and then issuing securities backed by those assets; factoring, which is the sale of a company’s accounts receivable at a discount to a third party; leasing financing, which is the provision of financing to a lessee for the purpose of acquiring an asset such as a piece of equipment or real estate; project financing, which is the provision of financing for a specific project or venture, such as the construction of a power plant or a mine; mezzanine financing, which is a type of financing that combines debt and equity, and is often used to finance leveraged buyouts, recapitalisations and other transactions; private equity, which is the provision of capital to private companies that are not publicly traded; and hedge funding, which are investment funds that use a variety of strategies to generate returns.

Each of These activities can bring additional revenue but also can present new challenges and risk exposures, so banks need to have robust risk management systems and processes in place to manage the credit risk associated with these activities.

Specialist skills to Manage Complete risks

Bankers rely on a variety of risk management techniques and practices including segmentation, which involves breaking down the credit portfolio into different segments, such as by industry or geographic location, to identify and manage specific types of risk.

By carefully evaluating the creditworthiness of potential borrowers through a thorough analysis of their financial statements and other relevant information and Risk grading, which generally involves assigning a risk grade to each borrower based on the level of risk they pose, which is then used to set appropriate terms and conditions for the loan.

Banks may also opt to set limits on the amount of credit that can be extended to a borrower, or the total amount of credit that can be extended to a particular industry or geographic area and regularly monitor the credit portfolio to identify and address any emerging risks or changes in the creditworthiness of borrowers.

Stress testing and simulating different economic scenarios to assess the potential impact on the portfolio and to identify vulnerabilities is another way of evaluating the risk a portfolio may present, and banks may choose to implement various risk mitigation techniques, such as collateral, guarantees, or credit derivatives, to reduce the potential impact of losses and making sure they hold capital and reserves to absorb any potential losses.

By implementing these techniques, specialist credit risk groups can effectively manage the credit risk in their portfolio, which helps to ensure the stability and profitability of the financial institution.

Solveworx’s Credit Risk Management for Relationship & Portfolio Managers is aimed at both aspiring and new-to-role Relationship Managers and bankers & high-potential credit officers looking for the next career step toward managing their own portfolio of SME, Commercial or Corporate clients. The course is also suited to broader Credit Risk Management team members looking to rapidly refresh or acquire the skills and knowledge needed to effectively manage a portfolio of SME, Commercial or Corporate customers on behalf of a Bank or Regulated Lender.

The course is vital for anyone looking to understand, and how to properly structure and manage a portfolio of credit exposures essential to generating profits, designed for anyone looking practical knowledge and insights into the major families of Transactions that generate Credit Risk for Regulated Lenders, and banking ‘best practise’ in managing credit exposures and generating profits. 

The Credit Risk Management course for Relationship & Portfolio Managers has also been structured with Team Training in mind to develop and enhance those Portfolio Management skills crucial to building and maintaining a high-performance Credit Management culture and profitable Lending Portfolio, with the inclusion of a ‘live’ simulation exercise. The live simulation is ideally suited to team and capacity building where business teams break into groups make key decisions, build out the credit story, and respond and react to ‘real-world’ challenges on the go.  

To find out more about running this course for your team or business, contact Solveworx today

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