---
sourceDocument: Xanadu Financial Services Operations
sourceDocumentLink: https://servicenow-prod.fluidtopics.net/r/xanadu/financial-services-operations

 Release :

    - xanadu

ft:locale :

    - en-US

ft:publication_title :

    - Xanadu Financial Services Operations

ft:clusterId :

    - finso

bundleId :

    - finso

workflow :

    - Customer and Industry


---

# Covenant Breach workflow

# Covenant Breach workflow {#ariaid-title1}

* Release version: Xanadu
* 
* Updated August 1, 2024
* 
* ![](https://www.servicenow.com/docs/portal-asset/ico-clock) 2 minutes to read

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 {#covenant-breach-workflow__section_spg_b2y_vnb}

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.  
Examples of covenants for business loans could be:

* Quarterly submissions of financial statements by the borrower
* Monthly submissions of inventory and stock statement or unpaid invoices
{#covenant-breach-workflow__ul_mqz_gcf_wnb}

An example of a covenant for personal loans could be a periodic submission of home
insurance premium receipts.
The following diagram shows how the application helps bank agents work on a covenant breach for a loan.Figure 1. Covenant Breach workflow

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.

    1. 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.

    2. 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.

    3. 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.

    4. A credit agent works on this credit task and updates the covenant information in the banking system.
    {#covenant-breach-workflow__ol_qsl_rlp_5nb}

After the case is complete, its state and the stage are set to Closed Complete and the work
notes are updated.