Loan loss reserves are falling. Loan review and ongoing credit administration are not getting the attention they deserve. The growing imbalance between the overall risk profile of the banking system and its internal risk management capacity is the result of a curious mixture of complacency and urgency. In this light, internal audit capacity and credit review seem almost superfluous-needless frills. I have heard it argued that, bankers are in the business of taking risk.
Bankers are in the business of managing risk.
More than ever they need internal audit, loan review, and compliance resources commensurate with the amount of risk they must manage. I can think of no practice more penny wise and pound foolish than to reduce those resources simply because things seem to be going swimmingly right now. But internal controls are more urgently needed right now than perhaps at any time in recent memory. Copyright 1996-2001 B.C. Partners, LLC All rights reserved.