On June 18, 2020 Strategic Risk Associates continued its ongoing educational efforts to inform banks and bank professionals on the most pressing and relevant topics of our time. The PPP (Payment Protection Program)has been the most notable stimulus effort enacted by the Federal Government to combat the devastating economic effects thrust upon the United States in recent memory. The webinar, hosted and moderated by Michael Glotz, SRA Founder and CEO, focused on best practices that banks have taken and must continue to take for the successful administration of the Payment Protection Program.
Guests Glenn Bolstad, Founder and CEO of Vikar Technologies and Albert Knotts, Chief Credit Officer and Co-Founding partner of SRA,provided insight. The session concentrated on where PPP stands today; the development of an efficient PPP forgiveness process; operational and process design necessary for success; understanding risks associated with PPP, and the importance of quality assurance and the role of audit.
The program has been running full steam for two and half months with 4.6 million loans issued, $20 billion in origination fees generated by banks, and $129 billion still available for lending (as of June 18, 2020).The significant increase in the unemployment rate, from 3.5% in February to 13.3% in May, puts in context the speed of government action with the banks as front line facilitators of processing loans and getting the money to the community of small businesses across the country. As noted in recent editions of NJ Bankers Association and ABA magazines, the hard work and actions of bankers and their employees has been unprecedented with most rising above and beyond to ensure success.
In addition to hard work and long hours, the necessity of an expeditious, efficient, and well thought out process is necessary to achieve success from borrower inquiry, paperwork, loan processing and ultimately forgiveness. This was outlined in detail by the guest speakers. Effective processes ensure that the requirements of borrowers and lenders achieve best results across the board, from the issuance of quality, forgivable loans,minimal losses due to fraud and non-compliant use of funds and successful quality assurance to consistent and effective teamwork from the front lines all the way up to the Board of Directors.
PPP has been a moving target, akin to building a plane while it is in flight. There are nineteen tracking rules that have been issued as guide posts for banks to navigate. Process is the biggest risk to banks followed by fraud and misuse of lent funds. Understanding risks; acting properly on their identification and mitigation along with the role of internal audit oversight; problem escalation and timely reporting to management and the Board must be thought out and executed to the best of a bank’s abilities. BSA/AML challenges run throughout the PPP lifecycle and audit loan review with upfront process and control is critical. Many lenders have sought strategic advantage through on boarding new clients during this time. Effective processes’ and controls will allow banks seeking such advantage their best shot at achieving this. Documentation from start to finish is paramount as is foreseeing future oversight and implications over the next two to three years.
PPP forgiveness should be automated as much as possible.Many firms have subscribed to third parties such as Vikar Technologies, who provide PPP automation software specifically designed for banks and PPP. In short, the establishment of quick assurance through internal audit, having a quality assurance plan in writing, assignment of executive ownership of employee training, the immediate identification of failure and its escalation and mitigation ensures banks participating in PPP of the best possible outcome.
Please visit our website to view the webinar as each of the points highlighted and many more are discussed in detail by the experts on the front lines of PPP.