Paper cuts

For Commerzbank, which processes over 170 multimillion euro loans and credit lines to corporations and institutions every year, streamlining the corporate credit-lending process to reduce paper and costs has become a priority. Jaymin Patel, project manager, document and process management at Commerzbank, reveals the steps taken to do just that.

Commerzbank is a private-sector bank with consolidated assets of almost u400bn. Serving individuals, as well as major regional and multinational corporations and institutions, our operations include a network of over 700 branches in Germany. Additional operations are concentrated mainly in other European countries, although a presence is also maintained in key markets such as the US. Approximately 35,000 of our employees serve roughly six million customers.

When corporate clients first request a new line of credit, our client-relationship managers will conduct research on the company to decide how to structure the loan. At the same time, the local credit office will carry out research to determine whether or not to offer the loan and under what circumstances. In the past, within a paper-based environment, the client’s file could be in only one person’s hands at a time. Therefore, much of this research, and other work, had to be done sequentially rather than in parallel. We knew storing this information in a central repository, where employees could access it easily and use it simultaneously, would go a long way towards increasing efficiency for credit operations. But we needed more than just easier access to credit information.

Our goal was to eliminate the need for paper and automate our entire corporate credit-lending process. However, because each corporate loan or credit line has its own complex, content-dependent workflow associated with it, the question was how? For each corporate credit application, we needed to take into account, for instance, which industry the organisation is in, how it is rated by organisations such as Standard & Poor’s and Moody’s, how it is rated internally, and the level of exposure to the client, the parent of the client, and us. Taking these and other factors into account requires approval from between 7 to 12 different people within the company and over 600 pages of paper documentation generated by 20 teams within a number of departments.

Manually gathering the supporting risk-analysis data and making sure the right approvals were obtained in the right order was often difficult and time consuming. We needed to ensure appropriate approvals and other internal business policies were enforced, that the right information made it into the right hands at the right time, and that all documentation was secure and could be tracked easily.

After evaluating various options for transforming our credit operations from a paper to an electronic-based system, we selected an enterprise-content-management platform as the foundation for our new system. In addition to its sophisticated document-management functionality, our chosen solution fulfilled the key requirements for creation of complex workflows to route documents according to their content. It included strong XML capabilities and, moreover, other large banks had already selected this solution. Established credibility within the industry helped convince us that our technology provider had the experience and expertise to address the specific requirements of a very large financial services organisation.

We took special steps to garner user support because the new electronic system was a significant departure from the way things had been done previously. We established a user-acceptance group consisting of key members from among the 20 teams, held frequent meetings with management and users, and provided in-house training at department level. In June 2001, the new system was rolled out to approximately 150 users in London and Frankfurt. Deployment was quick and easy because the solution was browser-based and did not require installation on desktops or major programming.

The new system automates the entire corporate credit-lending process at Commerzbank. Business rules are modelled within the system and documentation – including the loan application form, risk analysis, return-on-investment spreadsheets, presentations, correspondence, annual reports, meeting agendas and minutes – is stored electronically in a central repository. Client-generated correspondence and other documents originating in paper form are scanned into the system and stored as tiff images, while loan applications, meeting minutes and supporting credit documentation are entered into XML-based online forms. Workflow prompts and stores all approval signatures as needed. The need to retain paper is virtually eliminated.

When the system was first implemented, Commerzbank had approximately 100,000 pages of documentation relating to the previous years’ business, growing at a rate of approximately 150 pages per day or one file cabinet per month. Now, with information stored electronically, not only is it easier to search for and locate relevant documents, but the cost of retaining information is significantly less.

To enable each credit application to have different types of information and different workflows associated with it, we leveraged the virtual document capability of our selected platform to create ‘credit packs’. A credit pack contains all of the supporting documents for a loan or credit line. As new documents are submitted or created and signed off in the credit-approval process, the information is automatically linked to the credit pack. Credit packs are dynamically routed through workflow stages according to attributes captured in XML.

With a central repository, groups can now work in parallel on a credit application, which results in greater efficiency and enables faster time to final approval. Through workflows, the system automatically notifies the appropriate employees when approvals are needed. They can approve, approve with conditions, or reject, and the workflow will route the credit pack based on their decisions. Whenever users make approval decisions, the system prompts them to re-enter a password, which is treated as a written signature.

To increase efficiency further, we have integrated our content-management system with our contact-management software. As a result, client-relationship managers can, for example, click on a client’s record using the contact-management software and go straight to the client’s information within the content-management system.

With a paper-based system, it had been very difficult for risk managers to gauge a client’s exposure to a particular industry. Risk managers had to search through branch files and external storage facilities to gather data. In fact, the best-case scenario was someone maintaining a manual spreadsheet containing this information. Now, however, because our content-management system stores credit-application data in XML, it is easy to generate reports that provide transparency across the business, resulting in faster, better decision making.

With all the important data held as XML or metadata against credit packs, it is extremely easy to develop reports to find out almost anything we want to know. For example, statistics reports have been created to show how long credit applications have spent in each stage of the application process from data captured during the entire corporate credit-lending process. Reports can be generated quickly to provide user information such as exposure to an industry or clients with a high credit rating.

The typical duration for a loan or credit line is one year, but it is usually in our best interests to prolong the lending period, a task made easier with the new system. Previously, the client-relationship manager had to remember when it was time to initiate a loan re-evaluation and whether to offer clients an extension. Now, nightly reports based on XML-tagged credit data notify relationship managers when to begin the re-evaluation process for their clients’ loans. Also, our new system automatically creates a new credit application based on information contained in the previous credit application.

With a central repository and rules-based system, enforcing business policies for greater security and accuracy – from eliminating the chance of lost or misplaced documents to obtaining proper signatures in the right order – is now extremely straightforward. For instance, the credit pack, or parts of it, may be modified only by those with the appropriate permissions and only after the necessary signatures have been obtained. And when a loan is eventually offered to a client, it is easy for management to identify the version of the credit pack on which the final decision was based, thanks to the audit trail. All of these features have dramatically increased our internal audit rating.

In addition, by providing an easy way to store vast amounts of data, the new system facilitates our adherence to the industry’s account-opening regulations, commonly referred to as ‘know your client’. Numerous checks are made on every potential client (individuals as well as organisations) to determine whether or not to go ahead with a transaction. Our new platform allows this information to be stored indefinitely and retrieved at a later date. Another requirement, referred to as ‘Chinese walls’, mandates access to confidential information on a need-to-know basis; the system’s use of role-based permissions enables us to meet this requirement.

By using our new platform to eliminate paper and automate our entire corporate credit-lending process, from initial client request through loan prolongation and retirement, we have significantly increased operational efficiency and speed. In addition, we have improved our risk-analysis and decision-making capabilities.

As of 1 January 2004, the whole organisational structure and credit-lending business process was changed to meet the new MAK regulations for financial institutions. The business required approval processes for the local credit office and corporate banking to run in parallel, with each process affecting the other at key points. The approval processes are entirely automated within the application and each task that makes up the process has been made easier. A chronological log is kept of every route taken by a credit pack, every decision made by approvers, and their comments at each approval stage. Details such as where a credit pack has been sent, who has worked on it, at what stage and at what time are easily available. The new security policy is applied automatically at each stage of the credit-lending process to every person accessing the credit pack.

Lessons learnt with regard to the previous interface contributed significantly to the design of the new interface. The former interface required considerable work by the user to access information and functionality to perform various tasks. When logging onto the system, users were presented with just those credit packs they and their team were working on. From this point onwards, however, users can access all credit packs, related information and functionality to perform their work. While before, users were required to navigate through a number of web pages to perform tasks such as importing documents, now, they need only to click on a button on the main screen, where all relevant information concerning the credit application is displayed. Users can access documents contained within a credit pack, perform approval tasks, access comments on-screen, the reports screen and underlying folder structure from this one point. So instead of users going to the functionality or information they need to access, it is brought to them.

Jaymin Patel is project manager, document and process management, Commerzbank. He can be contacted at jaymin.patel@commerzbankIB.com.