OakNorth deploys its proprietary COVID-19 credit framework with one of the leading credit providers to middle market companies
Jun 02, 2020
- To support commercial lenders, OakNorth has developed a “COVID Vulnerability Rating” (CVR) Framework which rates loans from 1-5 based on their vulnerability to the new economic environment;
- The Framework integrates over 130 proprietary COVID-19 subsector scenarios, enabling commercial lenders to re-underwrite their loan books on a loan-by-loan basis;
- PNC Bank is deploying OakNorth’s CVR framework across its Commercial &Industrial (C&I) and Commercial Real Estate (CRE) loan books.
OakNorth, the next-generation credit and monitoring platform, today announces the signing of a commercial agreement with PNC Bank (NYSE: PNC), one of the leading credit providers to middle market companies across the country.
The unprecedented scale and rapid escalation of this crisis has created unimaginable impact on the economy. As a result, commercial lenders need to be able to:
- Quickly determine the subsector-specific impact of COVID-19 on their portfolio using forward-looking scenarios;
- Follow through on stress scenarios on a granular, loan-by-loan basis, rather than just at the portfolio level;
- Re-underwrite loans to businesses that are vulnerable, and all loans at annual review; and
- Monitor all credits more closely as sectors have become more volatile post-COVID-19.
This assessment requires a fundamentally different approach to credit analysis and monitoring. So, to support these lenders, OakNorth has developed a “COVID Vulnerability Rating” (CVR) Framework, which integrates over 130 proprietary subsector-specific COVID-19 stress scenarios with regional overlays, incorporating assumptions for impacts on key financial metrics such as revenue, operating costs, working capital and capex. The Framework enables commercial lenders to re-underwrite loans and bring consistency to their credit approach through the crisis, running risk analysis on a consistent basis.
PNC is deploying OakNorth across its C&I and CRE portfolio, mapping individual borrowers to 130 domains. PNC and OakNorth will run portfolio diagnostics on a periodic basis to factor the rapidly evolving scenarios of COVID-19 across subsectors and regions.
Rishi Khosla, co-founder of OakNorth, commented: “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 a 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.”Back to Press Releases