Covenant Breach workflow
Summarize
Summary of Covenant Breach Workflow
The Covenant Breach workflow enables bank agents to proactively address covenant breaches by contacting loan customers and formulating action plans. This workflow is applicable to both business and personal loans, facilitating effective risk management throughout the loan's lifecycle.
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Key Features
- Covenant Definition: Covenants are promises made by borrowers to adhere to specific conditions set by the bank at loan origination, crucial for monitoring potential loan risks.
- Workflow Initiation: The workflow can be triggered by an API or initiated by credit agents upon identifying a covenant breach.
- Task Routing: Once a case is created, assignment rules automatically route tasks to relevant back-office teams for further action.
- Document Verification: Document agents verify required documents as part of the workflow to ensure compliance.
- Credit Authorization: A credit authorization task is generated for review and approval by credit agents.
- Covenant Updates: Credit agents are responsible for updating covenant information in the banking system after case resolution.
Key Outcomes
Upon completion of the workflow, the case is marked as Closed Complete, ensuring all actions and notes are properly documented. This process minimizes risks associated with loan defaults and enhances communication between bank agents and customers, leading to better loan management and customer satisfaction.
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.