Department of Internal Audit and Compliance

Lender Relationships

Effectiveness and efficiency of operations 

A. Evaluate pricing and quality of financial services and relationships.

  1. Are appropriate factors used to evaluate current and prospective suppliers when establishing and maintaining financial services relationships?
  2. Is an all-inclusive form used to gather and evaluate supporting data for the bank evaluation process, and use scores-data about quantitative processes to numerically communicate the results of the process?
  3. Is performance of financial services providers monitored for strengths in areas such as competitive pricing, funds availability, willingness to make loans, geographic fit with the University, global relationships, product strength, long-term credit rating, and quality of relationship management?
  4. Are noncommercial banking relationships evaluated using these factors: capital markets expertise, innovativeness, ability to place securities, competitive pricing, quality of relationship officer, and the range, efficiency, and quality of service?
  5. Are banks informed of how well they are performing so that the banks will understand why the University directs some, but not all, of its business to a particular institution?

B. Understand expectations of suppliers and meet and exceed those needs that are realistic and achievable.

  1. Are periodic meetings scheduled, at least annually, with senior banking and lending personnel to discuss University operations and future financing needs?
  2. Is feedback obtained periodically from financial service suppliers and key bankers and lenders provided an opportunity to evaluate the relationship and discuss with the University how it can be improved?

C. Manage exposure to bank vulnerability risk and optimize the number of relationships.

  1. Are credit ratings and other information provided by reputable third-party services used to monitor financial services providers and analyze their strength?
  2. Are maximum total deposits restricted to the insured limits when doing business with banks that are experiencing financial difficulties?
  3. Have banking relationships been consolidated and individual volume increased with fewer banks in order to gain leverage and cut costs?
  4. Are indicators of bank performance tracked such as average balances with banks, average bank earning rate, earnings from balances, float activity, fees, interest on working capital, overdraft costs, and earnings from interest?
  5. Is management of each bank informed of the percentage of the University’s business the bank receives and why it has been chosen for that business?
  6. Have factors been considered such as increased bank participation in nonfinancial business, increased linkages between banks and insurance companies, and entrance of nonfinancial institutions into the financial marketplace when evaluating bank risk?

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Last Updated: 1/3/23