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Retrenching of the credit discipline

The pendulum has definitely swung back in favor of the credit discipline within financial institutions. The free wheeling credit standards of the past have proven once again to be problematic. So, things like cost of credit, credit risk modeling, and scoring models are back in fashion.

The trouble that we have created is that, in an effort to promote greater emphasis on the sales role, we centralized the underwriting function. This centralization allowed the sales team to focus on business development and underwriting, on credit.

The unintended result, however, is that we removed the urgent need to develop credit professionals. Instead, we pushed for greater efficiencies and productivity in underwriting — further stalling any consideration for the development of the credit professional.

Now we find ourselves with more problem credits than we have seen in the past 20 years and the pool of true credit professionals is nearly gone.

Once this current environment is corrected, let’s be sure to keep balance in mind. Again, soundness, profitability and growth — in that order of priority.