Outsourcing

Attracting skilled credit analysts has become a formidable task in today’s banking landscape. Various factors, such as compensation disparities with other industries, the decline in commercial credit training, and a scarcity of college graduates in specific regions, contribute to this challenge.

Given the shortage, credit analysts are in high demand, leading to increased wage demands beyond the industry’s customary rates.

Historically, banks have commonly outsourced functions like loan review, compliance testing, and internal audits. Considering this trend, why not explore outsourcing for the credit analyst role as well?

Shifting Tides in Banking Talent: The Rise of Outsourced Credit Analysts and the Evolution of Hiring Practices

In the past, banks commonly recruited recent college graduates as credit analysts, aiming to groom them into future commercial lenders and potential management positions. While this approach seemed logical in theory, the current market has witnessed a shift, with the success of converting credit analysts into long-term employees becoming more of an exception than the norm. Consequently, many banks are reconsidering and, in some cases, abandoning their commercial training programs.

Over the last decade, the hiring landscape has evolved, and banks are increasingly turning to experienced credit analysts who prefer not to transition into customer-facing roles. This shift has resulted in a challenge: finding affordable and permanent analysts has become more demanding.

In response to this industry need, outsourced providers have emerged as a solution to the demand for credit analysts. Given the rise in compensation for this role, outsourcing is now seen as a potentially cost-effective alternative. This is particularly true when considering the resources invested in recruiting and training, coupled with the potential for increased efficiency and productivity from an experienced analyst or outsourced provider

Banks Still Have Underwriting Control

Many bankers are resolute in their opposition to external vendors influencing underwriting decisions. Banks prefer granting loans to familiar borrowers and are cautious about potential interference from a third party, which could provide overly critical or negative analyses and impede their lending process.

It’s crucial to recognize that your bank will perpetually own and control the underwriting process. Outsourced credit analyst services primarily focus on presenting all relevant credit information in a standardized format, empowering the bank to make well-informed decisions. Importantly, outsourcing credit analysis should not alter the bank’s underwriting practices.

Banks take pride in their ability to offer swift responses to borrowers, and choosing to outsource analyst work does not equate to prolonged turnaround times. If contemplating an outsourced solution, it’s advisable to establish clear deadlines with your vendor.

Consider segmenting the credit analyst workflow between new credit requests and ongoing portfolio monitoring. Analyzing new money requests in-house while outsourcing less time-sensitive renewal requests and annual reviews could be a strategic approach for your bank.

Training, Retaining Analysts Can Cost You

Even with a successful hire of a qualified analyst, the time and resources required to properly train someone with minimal or no prior credit experience can be substantial. In larger banks with a pool of credit analysts, there’s typically a dedicated full-time employee responsible for training and skill development. However, in smaller community banks with only one or two analysts on staff, the training process may be more challenging.

It’s common for a senior analyst, credit officer, or a manager in the credit administration area to supervise a new analyst. However, these supervisors often have full workloads, potentially leading to inadequate training or an overstressed manager.

The challenge persists even after hiring and training a new credit analyst. Retaining analysts in the role is a significant ongoing challenge, with many leaving for higher pay or more satisfying roles elsewhere within two or three years. This cycle then prompts a restart of the recruiting and training process.

Ultimately, banks seek a sustainable solution to break the cycle of a revolving door of credit analysts. Outsourcing this role presents new opportunities for banks to achieve cost savings and enhance quality for their customers.