Meridian Feature: Loan Pricing
The Loan Pricing module is designed to help the Bank's Loan Officers achieve a more equitable and uniform way to determine the interest rate to be used for any given borrowing. The intent is to reduce the possibility of personal bias in determining a Borrower's rate by providing a structured calculation method of determining the rate.
This calculation uses "customized" parameters that will be established by Bank Management and will provide built-in considerations of the Borrower's current deposit and loan position as well as the quality of their credit rating and collateral being provided to secure the loan. In addition to factors concerning the Borrower, the calculation allows for Bank Management to update the following variables:
- The current cost of funds based upon reserve requirements and fixed rates being paid.
- Handling costs of non-interest bearing deposits.
- The current average loan rate.
- The desired spread to maintain between loans and interest bearing deposits.
- The risk associated with the length of term for the borrowing period.
- The minimum and maximum rates to be used by the Bank.
The calculation will also allow for the consideration of new compensating funds that the Borrower is willing to provide and takes into consideration the rate that would be paid on these new funds to determine the loan rate. The reverse of this option is also available in that the Loan Officer can use the rate desired by the Borrower to determine what amount of new compensating funds are needed to justify the desired loan rate requested by the Borrower.
Management will be provided with two daily reports:
- "Loans Priced Not Made" will provide Management with a tool to review loans that were essentially bid upon and possibly determine why the Borrower chose not to take the loan. This can also be used for a follow-up call to ask the customers what else might have been done to get their business.
- "Loans Made Not Priced" will provide Management with an audit of loans that were done by an Officer without the benefit of the Loan Pricing module and should therefore be reviewed for potential bias.
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