Covenant Breach workflow
Summarize
Summary of Covenant Breach Workflow
The Covenant Breach workflow enables bank agents to proactively engage with loan customers when a covenant breach occurs. This process is essential for both business and personal loans and helps the bank manage potential risks associated with loan defaults.
Show less
Key Features
- Covenant Definition: A covenant is a commitment by the borrower to meet specific conditions throughout the loan's duration, which helps the bank monitor and mitigate risks.
- Workflow Process: The workflow automates the routing of tasks related to covenant breaches to relevant agents, ensuring efficient case management.
- Case Initiation: A case can be triggered either through an API or by a credit agent when a breach is identified.
- Task Routing: Once a case is created, tasks are assigned to back-office teams based on established rules, streamlining the review and verification process.
- Document Verification: Document agents verify required documentation to ensure compliance with covenant conditions.
- Credit Authorization: A credit authorizer reviews and approves the case, updating the covenant information as necessary.
Key Outcomes
By utilizing the Covenant Breach workflow, banks can effectively manage covenant breaches, maintain oversight of borrower compliance, and minimize risk. The efficient handling of each case results in timely updates and accurate records within the banking system, ultimately leading to improved customer service and loan management.
Learn how bank agents, using the Covenant Breach workflow, proactively contact a loan customer for a covenant breach and decide on an action plan for the future. The workflow applies to both business and personal loans.
What are covenants
A covenant is a promise by a borrower to a bank to abide by certain conditions through the life of the loan. Covenants are set up by the bank at the time of originating a loan. Monitoring covenants is an ongoing activity for the bank. A covenant helps a bank to identify and mitigate potential risks that are associated with a loan. When a covenant is breached, it is a signal of a potential default by the borrower.
- Quarterly submissions of financial statements by the borrower
- Monthly submissions of inventory and stock statement or unpaid invoices
An example of a covenant for personal loans could be a periodic submission of home insurance premium receipts.
The following workflow routes the case and tasks for a covenant breach to agents in different departments. The agents log in to Workspace to work on the tasks in their queue.
- As a credit agent or via an API
- If a covenant breach is observed for a loan, an API in the backend triggers a Covenant Breach credit service case. A credit agent can also create this case.
- As back-office agents
- After the case is initiated and a credit agent updates the case details, a workflow is triggered automatically. The assignment rules route the associated tasks to the appropriate back-office teams.
- A credit agent reviews the case details and adds additional details such as the covenant compliance status.
The document processor service determines the documents that must be verified for the case. The workflow generates an inbound document verification task for the document agent.
- A document agent works on the inbound document verification task to verify each document that is listed in the task. If required, this agent can request for a deferment of a specific document.
The workflow generates a credit authorization task for the credit agent.
- A credit authorizer (credit agent) works on the credit task to review and approve it.
The workflow generates a covenant update task for the credit agent.
- A credit agent works on this credit task and updates the covenant information in the banking system.
- A credit agent reviews the case details and adds additional details such as the covenant compliance status.
After the case is complete, its state and the stage are set to Closed Complete and the work notes are updated.