Oliver Wyman

News

“Ask a dozen bank chief executives, ‘What is your bank’s competitive advantage?’ and you will get a long list of answers that will most likely include brand, high-calibre people, specialist knowledge and innovative products,” says Simon Harris, head of investment and commercial banking at financial services strategy consultant Oliver, Wyman & Co.

Harris says banks are failing to realise and take advantage of one of their main potential competitive advantages: credit management, the ability to understand and manage credit risk. Oliver, Wyman is publishing a report on why the management of credit is an area that banks need to define as a competitive advantage. “Credit products are typically the greatest consumer of banks’ required equity both on an economic and a regulatory basis, so if return on equity is the name of the game, credit is clearly a significant lever,” says Harris.

According to Oliver, Wyman, extracting a competitive advantage from credit management requires the following: the ability to accurately rate your debtors; pricing and early warning tools to allow better discrimination of risk; identification of concentrations; calculation of the risk-adjusted cost of lending; and timelier intervention in the case of deteriorating credit.