Bank of the West is installing an automated credit request system to streamline its commercial lending, improve consistency in loan decisions, and save money.
Lenard N. East, the vice president for strategic planning and administration in commercial banking at the San Francisco unit of the French financial giant BNP Paribas SA, said in an interview last month that the bank plans to roll out the system to its entire lending staff of 1,000 by the end of this month.
Its executive management committee approved the full rollout last month after a three-month pilot test involving 300 users, Mr. East said.
Bank of the West has grown by acquisition and now operates 700 branches in 19 states, he said.
In retail lending, borrowers’ credit scores have helped bankers make consistent decisions, but in commercial lending, which generates 35% of the bank’s revenue, there has been much more variation in the way loans are handled, he said. “It’s one thing to integrate systems. It’s quite another thing to integrate cultures.”
The bank began work on its lending automation program 13 months ago, seeking a way to streamline a paper-based process that typically required three to five days to handle a routine credit request, Mr. East said. “We felt we were losing our competitive edge, even our competitive parity.”
After reviewing several alternatives, Bank of the West selected automated systems from the FileNet unit of International Business Machines Corp. of Armonk, N.Y., for managing business processes and enterprise content.
Bank of the West also used an outside consultant to develop the front-end interfaces and integrated the JRules business rule management system from Ilog SA, a French software developer that has its U.S. headquarters in Sunnyvale, Calif.
The FileNet systems include basic “if-then” logic for business rules, but “what we were attempting to do was much more complex,” Mr. East said. “That’s where JRules came into play.” That system enabled the bank to develop “a delegated lending authority hierarchy” with consistency throughout its commercial loan origination process.
For example, a senior vice president could approve a $5 million loan, while one for up to $10 million would have go to an executive vice president, he said, and beyond that, the credit review committee would make the call. (Different rules apply for agricultural, Small Business Administration, and equipment leasing and finance loans.)
The pilot test showed that the system reduced the time required for credit reviews to one day and improved regulatory compliance, Mr. East said. “We got really good bang for the buck,” getting “a sophisticated system for a fraction of the cost of what other banks have spent.”
The bank will save $1.5 million over five years in time savings alone, as relationship managers no longer have to fill out paperwork, he estimated.
