Sunday 21 July 2013

Relevance of Structured finance review for banking systems


The apparent complexity that has crept in every sphere of financial domain has mandated institution of robust review mechanism to keep track of the discrepancies. Such discrepancies, if gone unnoticed, can throw the operational framework off the track bringing about unprecedented loss. Structured finance review is one such audit instrument to validate the health and efficiency of asset quality and associated spectrum. 

Overview of structured review

The review program is tailored for clients who wish to assess the asset quality of targeted entities involving business development companies, specialty finance companies, commercial institutions, and leasing agencies. 

Areas covered

The specialized fields that fall within the ambit of structured finance review includes middle market non investment grade leveraged finance, commercial real estate finance classified in the domains of conventional and non conventional, asset dependent lending, and cash flow enterprise value lending. The classification of assets is broadly done at the senior and subordinate debt level across industry wide categories.    

Implementation 

Experienced senior bankers are at the helm of structured review program. Such bankers possess significant amount of exposure at senior or executive level management and have commendable expertise in designing and implementing structured finance. The review carries out assessment of the adequacy and reliability of the credit and investment risk rating system, loan approving mechanism, loan monitoring framework, underwriting, efficiency of loan and credit administration, and legal documentation. It also attempts to check the sufficiency of asset valuations and specific loan loss reserves. Specialized checks are done with regards to special purpose vehicles discharging role as conduits through items that involve testing of payment application, cash collections, servicer report, reviewing borrower base, information systems, corporate governance and true sale accounting. 

Report mechanism
The structured finance review program is tailored to suit the client’s requirements optimally. The agency executing the review will prioritize the actions accordingly for rapid turnaround time. The ambit of activities to fall under the review will be decided upon in consultation with the client. The structuring of review is done in a manner that will facilitate fast delivery of written report soon after completion of the onsite review process. The report will comprehensively cover the findings of the review. It will include the observations and conclusions in summarized version. A written report for each type of loan and investment reviewed will underpin the findings.


Structured finance review is a robust mechanism to be exercised diligently for ascertaining the overall health of a financial institution. Banks should exercise this option diligently to plug any loopholes that might have crept in inadvertently in the loan review, approval, monitoring and other related financial activities.

CEIS Structured Finance Review programs are customized to the client's needs and each assignment is prioritized for a quick turnaround time. Find more information to http://www.ceisreview.com/pages/Services/2/125/Structured_Finance_Review

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