Avantage Reply was engaged by a Tier 1 Bank in a high-priority risk compliance initiative for the Corporate and Investment Bank (the “Bank” or “Client”). The Client’s Middle Office (“MO”) risk management team is responsible for the evaluation of the structured finance (“SF”). The portfolio is strategic and highly leveraged containing deals with structures such as financial sponsors, syndicated/ club lending, green energy special purpose vehicles (SPVs), and funds.
The adverse impact of the Covid-19 pandemic on asset performance coupled with rising energy costs and higher mark-to-market exposure for inflation-linked hedge facilities significantly increased the risk profile of the portfolio. This required thorough analysis and evaluation of the underlying lending structure and asset quality.
A further complementary review of the credit MO ‘Processes’ and ‘Ways of working’ was completed and presented alongside due considerations. The goal was to fortify the Bank’s ability to effectively drive remedial plans and initiatives to resolve challenges and impeding risk management inefficiencies going forward.
The Client’s MO team needed support to ensure that a highly strategic SF lending (bilateral and syndicated) portfolio met credit compliance requirements for the set period.
Also, a sub-goal of the deliverable was the facilitation of the successful ringfencing of key entity/ branch which has critical implications for the balance sheet capital, especially considering the large exposure and highly leveraged nature of SF portfolio.