Wholesale credit is a bright spot for financial institutions. It did not cause the financial crisis, it does not lend itself to systemic risk, and it remains a profitable area for banks. Regulators and governments are also supportive of commercial lending for its role in assisting economic growth. Unfortunately, most banks do not have an adequate risk framework in place to fully take advantage of wholesale opportunities.
Prior to the financial crisis when credit quality was good, wholesale lending generated enough profitability to mask inefficiencies in controls, data management and systems. Today, with a renewed focus on increasing wholesale lending volumes while closely managing profitability, these shortcomings have become very visible, and banks need to correct them. The large number of stakeholders within a bank, the complexity of the problem, and the historic underinvestment in wholesale lending credit management can, however, make it challenging to know where to begin.