By Aisling Finn on Friday 5 June 2020
The one to five rating system assesses loans based on vulnerability and will allow commercial lenders to re-underwrite their loan books.
OakNorth has partnered with publicly-listed American bank PNC to roll out a ‘Covid Vulnerability Rating’ (CVR) to support commercial lenders through the coronavirus crisis.
The CVR framework will be used across the two banks’ commercial and industrial (C&I) and commercial real estate (CRE) loan books.
The system will rate loans from one to five depending on vulnerability and takes key measures into account such as revenue, operating costs, working capital and capital expenditure.
Both banks will run several tests periodically to help model the “rapidly evolving scenarios of Covid-19” across 130 “proprietary subsector-specific stress scenarios.”
The Framework enables commercial lenders to re-underwrite loans and brings consistency to their credit approach through the crisis, running risk analysis consistently.
Rishi Khosla, co-founder of OakNorth, said: “Never has the need for enriched underwriting, credit science and a forward-looking approach been more important in commercial lending than it is right now with the ongoing challenges posed by COVID-19.”
“Instead of playing for defence, spending time trying to figure out where their current books stand, running scenarios based on financial models that are no longer relevant, and trying to minimise the downside, we are working with lenders to enable them to get on the offensive, focusing on growing their business and orchestrating a consistent customer financing strategy,” he added.
As well as helping to dish out loans to companies over in the US, OakNorth has been helping businesses on this side of the pond too.
CEO Khosla also recently declared interest in acquisition opportunities for the second time in a public forum last month.