Pub. 7 2012-2013 Issue 1

www.nebankers.org 12 Extraordinary Service for Extraordinary Members. F OLLOWING CHALLENGING TIMES, our industry has historically responded by reassessing loan underwriting and monitoring processes. Often as a result, loan poli- cies are likewise modified to memori- alize these frequently painful lessons learned. But questions haunt us still: How likely are we to repeat the mis- takes of the past if we do not fully adopt the spirit and intent of these changes? How do we avoid this pitfall? The answer lies deep within our bank’s credit culture—in the glue inside the binding of loan policies and procedures, and the spirit and intent looking over our shoulder with each credit decision. Banking is built upon knowledge and behavior. Our behaviors are shaped by our knowl- edge and memories of “the good, the bad, and the ugly” decisions of the past. Even today, Benjamin Franklin’s words ring true: “Creditors have bet- ter memories than debtors.” A sound credit culture fosters open and frank consideration of different viewpoints, built upon the knowledge and memo- ries from various backgrounds and experiences. When fully adopted, the decisions of the bank’s loan committee are strengthened by respecting and encouraging independent judgment to resist the herd mentality and other small group dynamics. Credit Culture Self- Assessment An equilateral triangle illustrating the components and relationships be- hind credit culture serves as a backdrop for this self-assessment. The triangle’s equal sides and segments remind us that each component and relationship is equally important for an effective, well-balanced credit culture. The base of the triangle provides the daily reinforcement of credit cul- ture and alignment with the guidance of the pinnacle segment: the bank’s mission and purpose . • How well do we know our mission and purpose? Are they still meaning- ful to our stated goals? • Do they provide clear direction of what is expected of us and the rationale behind our policies and processes? In a hectic work environment, we all need periodic reminders—from citing excerpts on all-employee emails or on network access portal pages, to recognizing tangible examples at staff meetings. We need to find ways to ef- fectively communicate and constantly support these tenets of credit quality, if they still offer meaningful and val- ued ideals on which to build the bank. Loan policy and processes (or procedures) provide the philosophi- cal framework and tactical field guide for our daily work. These Does Our Credit Culture Need Cultivating? Michael Wear , Faculty Member, Graduate School of Banking at the University of Wisconsin-Madison