SOP

Lack of an independent risk management function. Wellfleet’s risk management

function is a three-level hierarchy system established primarily for signing off business
credit applications based on individual experience. Credit proposals are initially received
by the lowest level which consists of senior credit officers who signs off these requests so
long as it is within their authority, those that which exceeds their limit are passed to the
middle level comprising regional credit officers which in turn does the same to the Group
Credit Committee (GCC), the group tasked in dealing with the largest credit proposals.
Despite the pros of the said function, it was susceptible to various defects as well. Thus,
the entity’s current credit application process was held in question whether or not it is
capable of supporting the growing demands of the business especially dealing with large
credit proposals given that such was time consuming due to the lengthy flow time in the
approval of requests especially megadeals.

ANALYSIS

The three-level hierarchical approach used by Wellfleet to manage risk requires

the approval of each level in the hierarchy. The decision is made by the Group Credit
Committee but it still needs to be approved by the senior credit officer and the regional
credit manager slowing customer response making the risk management process time-
consuming. Risk management is not addressed by business units and risk analysts do not
consider the business perspective. Wellfleets risk culture was hampered by its
hierarchical structure and risk management techniques and managers viewed the whole
process as slow. For both retail and commercial banks the group risk committee reviews
and approves loan proposals, standards and limits. The Corporate Client Group has
pursued transformative initiatives despite the fact that there is no risk appetite statement
that sets a corresponding acceptance threshold. The group's board of directors CEO and
CRO have no direct involvement in the loan approval process other than periodically
reviewing the company's loan portfolio after a decision has been made. There is no limit
to the authority of the Corporation Credit Committee. The Group Credit Committee may
authorize a loan as long as it meets the bank's regulatory criteria and the Board of
Directors has no control over the loan approval process and has no influence over the
decision made by the Group Credit Committee.