The Toronto-based bank started a rollout of Lending Advisor, a product marketed by Crowe, Chizek & Co. of South Bend, Ind., in late 1988, and it was in full operation the next year.
Lending Advisor is a knowledgebased expert system, which means it has the information needed to help the bank meet its guidelines for making commercial loan decisions. The system guides lenders through the process of analyzing commemial applicants' creditworthiness.
"We looked into this type of system because we realized that it offered the ability to put information at our fingertips by connecting the system to the mainframe," said Mark MacLaren, general manager of risk training. "It allows us to see all of our loan information throughout all of our locations.
"With the size of our bank at over 1,400 locations throughout the world, by having the information linked to the hard drive allows us to manage the portfolio better," said Mr. MacLaren.
Management at the $107 billion asset Canadian Imperial realized that the system would bring a discipline to the process with a consistent approach to lending.
"Lending Advisor offers more than just a number
- crunching ability," Mr. MacLaren said. "It provides us with tools for subjective analysis of the loan application. It lets us assess areas like industry, business, and management risk in ways not possible before areas that were not dealt with as in-depth by our account managers."
The system allows account managers to enter loan information directly on a screen while they are meeting with customers.
The bank's personal computer screens prompt the managers as to what information is needed to complete the application.
By linking the remote system to the mainframe, the Canadian bank is able provide and process informarion throughout its nationwide network electronically, instead of having to move paper from one location to another.
"Now account managers can work through the apphcations with a credit analyst on screen and through multiple viewing sights," said Mr. MacLaren. "This a prime product to support reeengineering efforts by the bank, because the information can be looked at without moving it back and forth from location to location."
"We are able to have an audit trail and know what is the right version of the application we are working with," he continued. "We are looking into implementing an on-line approval process."
"An advantage to using an expert system is that all the application information is available on screen, which allows judgments to be made more efficiently than by sending it back and forth by mail or courier," said John Dfizik, a partner at the consulting firm Ohver, Wyman & Co. in New York.
Canadian Imperial does not use the system in offices outside Canada because they are not directly linked to the mainframe computers in Toronto.
Once information is entered in the system, Lending Advisor scores the data either negatively or positively depending on creditworthiness and provides the lender with a bar chart that displays the strengths and weaknesses of the borrower.
"The system is be'mg used as part of an integrated process for loan approval; it does not operate solely for cnmching numbers but involves a complete thought process," said Michele Des Roches, product manager at the bank. "It prompts the account managers to gather information on the industry risk and the strength of management.
"Account managers are required to think about the other risks associated with the loans, as opposed to just the numbers from the financials," she added.
Mr. Drizik said expert systems level the playing field and allow lenders to make uniform determinations of loan quality.
"The system provides the vehicle to make the decision in an efficient and productive manner," he said. "It forces lending officers in a diverse network to use the same criteria for evaluating creditworthiness.
"It is an automated version of the traditional credit process everything is done umformly across the board ."
The system is also used as a training and discipline tool toward the lending process.
"There was a measurable increase in the amount of industry risk that went into evaluating the credits, which is the direct result of having the system," said Mr. MacLaren.
Before the bank used the expert system it was using a paper-based procedure. The paper trail has since been reduced dramatically.
A credit report done the old way used over 30 pages of paper; now three pages suffice.
Although management still requires applicants to include a hard copy of their financials, the bank has been able to take 80% of the paper out of the process.
"The whole credit application is now contained within Lending Advisor, whereas before we had pieces in one system that had to be moved around," said Mr. MacLaren. "Now everything is in one area that is very easy to get at and review."
The bank recently integrated Lending Advisor with its pricing and credit approval system, which gives the account manager access to information without duplication while increasing overall efficiency. "What is happening now for many banks is that people want completely integrated systems, and this allows it to happen," said Mr. MacLaren.
"This puts all the information in one data base with single entry."
Ms. Des Roches said that this fall the bank will be adding the ability to have account representatives use laptops at client sites to take applications.
"By adding this feature, we will be able to increase the size of the portfolio as well as enhance our ability to service customers," she said.
"This will allow us to be able to work with customers hands-on while increasing efficiency and customer service."