The Reemergence of Formal In-House Credit Training Programs in the Banking Industry

Sandra Williams, Senior Vice President, Senior Credit Officer at Liberty Bank - CT

Sandra Williams, Senior Vice President, Senior Credit Officer at Liberty Bank - CT

In the early 1990’s and extending through the mid-2000’s large and mid-size regional banks totally cut or severely diminished the scope of in-house credit training programs. These programs were viewed as expensive, labor intensive and not vital as banks strove to recover from the crises within the industry during these periods. During this same period banking regulations became more stringent and quantitative measurement of portfolio risk more critical. Technological advancements enabled greater reliance on computer-aided training to lower training costs and reach a wider audience. Organizations such as RMA developed certificate programs that sought to standardize credit analysis training. Banks also utilized external training resources to leverage the expertise of specialized training providers without incurring significant long-term costs.

To summarize the shift towards external training programs occurred for several reasons:

1. Cost-effectiveness: Developing and maintaining in-house training programs was expensive. External training programs allowed banks to leverage the expertise of specialized training providers without incurring significant costs.

2. Expertise and specialization: External training programs often provide access to industry experts and trainers who have specialized knowledge in credit analysis and lending. This allows banks to provide their employees with the most up-to-date and relevant training.

3. Regulatory requirements: The banking industry has witnessed increased regulatory scrutiny in recent years. External training programs often incorporate regulatory updates and compliance training, ensuring that employees are aware of the latest regulations and guidelines.

4. Flexibility and customization: External training programs offer flexibility in terms of timing, duration, and customization. Banks can choose programs that align with their specific needs and the skill sets they want to develop in their employees.

The transition to reliance on-line programs and external training providers did lower overall costs and provide a measurement tool to record completion of required regulatory training. Inculcating information gleaned during this type of training into actual work production has proven to be more challenging. Bank policy often differs in form and substance among different financial institutions. External training courses teach the requirements but not the application or process used by a particular bank. That can only be done within the institution and relies on an organized effort which is often not present.

Traditionally In-house credit training programs typically consisted of a combination of classroom training in financial statement analysis, loan structuring, debt repayment and other relevant topics. Some programs included full college courses in accounting and finance for those candidates who did not major in those subjects. Case studies were used to enhance understanding of the technical skills introduced in class. Students applied the skills taught through writing exercises, oral presentations, and group activities. Importantly, candidates learned and understood their institution’s credit culture and were introduced to lenders and senior management through meetings and events. Professional development and future career progression were key elements of these programs. A critical aspect of these programs was the identification and building a talented pool of future leaders.

“Technological advancements enabled greater reliance on computer-aided training to lower training costs and reach a wider audience.”

Over the last 5 years banks began to re-introduce in-house training programs as realization that exclusive reliance on on-line and external training programs were insufficient to meet the ever-growing complexity of today’s banking environment. Banks need talented and highly skilled employees that not only possess the technical or hard skills necessary for credit analysis but also possess the soft skills necessary to assess credit risk. Soft skills include:

• Creativity,

• Critical thinking,

• Collaboration,

• Communication,

• Problem solving,

• Time management,

• Active listening, and

• Leadership

More recently, an emphasis is being placed on soft skills development in addition to analytical skills as Companies identified these competencies as key to the success of young workers in the 21st century workplace. When choosing between two seemingly equal candidates, organizations are now prioritizing “soft skills” as the key differentiator. In LinkedIn’s Global Talent Trends report, 92% of talent acquisition professionals reported that soft skills are equally or more important to hire for than hard skills. And 89% said that when a new hire doesn’t work out, it’s because they lack critical soft skills.

The new versions of in-house training programs now span a period of two years on average and offer a rotational component through allied departments which expands the breadth of the curriculum and allows a fuller understanding of the entire lending process. They also combine advancements in technology-based training platforms to teach the base technical skills allowing more time to incorporate the soft skills necessary for long-term career success.

Infrastructure costs to re-build these programs will be offset by the availability of on-line training platforms, increased ability to skillfully assess risk and make high quality lending decisions. The re-emergence of in-house training programs blended with the judicious use of on-line training and external resources will allow development of a cadre of highly skilled commercial bankers and future leaders.

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