Before the financial crisis, the primary role of the bank underwriter was to make good decisions in deploying the bank’s resources to help loan applicants achieve their goals. Learn how this role in changing in the industry.

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BEING A BANKER TODAY:
THE CHANGING ROLE OF THE
UNDERWRITER
An Excerpt from “2017 Industry Insights:
Perspectives from the Front Line”
by RMA’s Credit Risk Council

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THE BANK UNDERWRITER’S ROLE
• Before the financial crisis, the
primary role of the bank
underwriter was to make good
decisions in deploying the bank’s
resources to help loan applicants
achieve their goals.
• The scorecard for how well the
banker or underwriter did their job
could be seen in their unit’s
income statement.

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THE BANK UNDERWRITER’S ROLE (CONT.)
In recent years, documenting the rationale for the credit
decision has become equally as important.
Substantiating the reason for an approval or decline is
essential for a number of reasons, including:
• Consistency.
• Fair lending.
• Making the job of subsequent reviewers easier.

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THE CHALLENGE
The challenge is communicating to
today’s underwriters and bankers that
both the decision and the
documentation are important.

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THE CHALLENGE (CONT.)
Failing to make that communication puts the
industry at risk and demoralizes the current
crop of bankers who might not feel the same
exciting connection to their customers’
successes.

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THE CHALLENGE (CONT.)
Taken to its worst extreme,
bankers could decide that
in some cases saying “no”
is easier than doing the
necessary work to
document the justification
for a “yes,” especially on a
complex transaction.
That would be a negative
outcome for all parties—the
banker, the bank, the
borrower, the industry, and
ultimately the economy.

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What, then, should a banker
or a leader do?
RMA’s Credit Risk Council
recommends the following.

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UNDERSTAND THE LINKAGES BETWEEN THE
DECISION AND THE SUBSEQUENT REVIEW(S)
Bankers at all levels should:
• Understand the importance of the three-lines-of-defense model.
• Appreciate the linkage between the work they do and how that
connects to other parts of the review process (QC, ERM,
internal audit, regulators, external audit).
Bankers equipped with the knowledge of how the lending
ecosystem works are less likely to bristle at the required
documentation.

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LEADERS SHOULD CONTINUE TO SUPPORT
BANKERS AS THEY LEARN FROM MISTAKES
Becoming an effective
lender is not an easy
process, and it usually
involves making mistakes
and learning from them.

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LEADERS SHOULD CONTINUE TO SUPPORT
BANKERS AS THEY LEARN FROM MISTAKES (CONT.)
In the current zero tolerance environment,
it is incumbent upon both lenders and
bank leadership to remember that while a
business may look for zero defects in
regulatory or compliance metrics, a never-
make-a-bad-loan standard would be
detrimental for both banks and the
economies they serve.

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LEADERS SHOULD CONTINUE TO SUPPORT
BANKERS AS THEY LEARN FROM MISTAKES (CONT.)
Banks are in the business of
taking and managing risk and
the occasional defaulted loan is
the result of this risk-taking.

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LEADERS SHOULD CONTINUE TO SUPPORT
BANKERS AS THEY LEARN FROM MISTAKES (CONT.)
Lenders need to be
empowered to use their pens,
and management needs to
support them and differentiate
between items with a zero-
tolerance standard and ones
with more of a risk-reward
determinant of what is
appropriate.

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BANKERS SHOULD ALWAYS
REMEMBER THE CUSTOMER
Bank leaders must ensure their
team members comply with
rules without losing sight of the
customer experience.

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BANKERS SHOULD ALWAYS
REMEMBER THE CUSTOMER (CONT.)
It is essential for
lenders to meet
compliance standards
and document the
decision while making
the process consistent
and seamless for
subsequent reviewers
to evaluate.

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BANKERS SHOULD ALWAYS
REMEMBER THE CUSTOMER (CONT.)
Equally important is staying
focused on the customer’s
needs and helping them
achieve their goals.

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The Credit Risk Council supports
professionals who are responsible for
establishing, maintaining, or carrying
out credit risk management policies.
The council focuses on funded and
off-balance-sheet risk management,
including capital markets activity, and
other forms of credit intermediation
and risk mitigation.
About RMA’s Credit Risk Council

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For additional information about
credit risk management,
visit
www.rmahq.org/credit-risk/
LEARN MORE

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