Risky Business: Should Mid-Size Financial Institutions Bank High-Risk Customers?

Katie Foley, CAMS-FCI

In today’s ever changing regulatory environment financial institutions are constantly evaluating risk and looking for effective and cost efficient ways to mitigate risk. The trend has become so prevalent that the concept of de-risking has resulted; where some financial institutions have executed mass exit strategies of certain business relationships to decrease their overall risk and better comply with changing regulations.

Proper planning prior to on boarding high-risk customers can result in mutually beneficial relationships. Planning should include consideration and evaluation of current monitoring systems and/or manual processes, staffing considerations such as training and experience level of staff, pricing considerations, time considerations and regulatory impact.

This paper will explore the unique opportunity this situation provides mid-size financial institutions. With the appropriate due diligence conducted up front combined with accurate pricing, high-risk customers can go from risky business to profit generator.

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