Magazine article American Banker

B of A Risk Chief Cautions against Lowering Guard

Magazine article American Banker

B of A Risk Chief Cautions against Lowering Guard

Article excerpt

With the industry crawling out of its worst credit cycle in a decade, Bank of America Corp.'s chief risk officer warned lenders Tuesday against softening their underwriting standards.

"Ask yourselves, right now, whether you have already begun to relax your standards -- for all types of risk," Amy Brinkley said in a keynote speech at the RMA Risk Management Conference here. "On the credit front, the evidence from leverage ratios and loan covenants seems to suggest that could be the case."

In an interview after her speech, Ms. Brinkley said Bank of America had analyzed its middle-market lenders to see how loan terms were being enforced.

"We had good results, but we did have some variance across regions," she said. "We looked to see why one region performed better than another region. We found that the better-performing regions had done a better job with loan covenants -- not just the quality of the loan covenant but then when the loan covenants were triggered, they [the lenders] were quicker to take action to mitigate the risks."

Referring to the controversy surrounding after-hours mutual fund trading, Ms. Brinkley said Bank of America "will continue to do whatever is necessary to maintain and build trust and confidence."

"If we find something wrong, we'll fix it, and we'll be better for it," she said. "As important, we will go forward with a renewed appreciation for consistent execution of our disciplines every day." [See related story on page 18.]

In the interview Ms. Brinkley said judging products or services must include an assessment of reputation risk.

"Would you feel good about reading about it? It hits all your other criteria: It makes good economic sense; it meets all legal, regulatory, and accounting requirements. But how does it reflect on the company? That's the ultimate question we need to ask."

In her speech Ms. …

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