While speeding up loans, the bank didn't want to lose the discipline of its loan approval process, which kept its portfolio of commercial loans as a strong profit center of the bank, said Lenard East, VP of strategic planning and administration of the commercial banking division, in an interview.
As Bank of the West has spread over the last eight years from its base in northern California across 19 states of the West and Midwest, it found it was trailing key competitors such as Wells Fargo and Bank of America in capturing commercial loan customers. "We had six [bank] acquisitions in the last eight years. We were faced with a number of challenges," said East.
Many of its acquisitions didn't follow Bank of the West's paper-based practice of having a central credit committee composed of the bank's top executives sign off on every loan.
"Bank of the West is very conservative in the risks the bank is willing to expose itself to," East said. But some of its acquisitions allowed lower level executives, including branch managers, to approve commercial loans. Those approvals were based on a wide variety of factors and didn't necessarily follow the central review committee's best practices.
Instead of trying to centralize all loan reviews, Bill Even, director of Bank of the West's Credit Risk group, set about capturing the rules and implicit knowledge of the central review committee's loan processing. They became the knowledge base of a review process built into a business rules engine, iLog's JRules, said East.
The JRules engine became the basis for an automated loan origination and approval process, Bank of the West's Credit Request Information System. The system processes loans using FileNet's Enterprise Content Management system for manipulating digital documents and FileNet's Business Process Management system, which governs the steps of the loan process. No longer did an application with supporting documents have to be mailed to the Credit Risk department to get manager sign offs. Those approvals are now granted with digital signatures.
Brickwalk, a San Francisco-based business process consulting firm, created a user interface for the 1,000 "relationship managers", or commercial loan account managers, who use the Credit Request Information System. With CRIS, relationship managers could originate a loan application, process it, and often grant approval on the same day, sometime within hours of receiving the application, said East. The process formerly took three to five days.
With CRIS, "authority is delegated much further down in the bank's hierarchy," he said. A top bank official still reviews and OKs each loan, but that step is aided by ratings awarded by the rules engine that indicate how well the application conforms to the standards of the credit committee.
Now time formerly spent manually preparing and mailing applications and making phone call follow ups are spent instead on "producing sales and delivering a higher level of customer service," East said.
The CRIS system runs on top of an Oracle database and Sun Microsystems UltraSparc servers.