The Interview
How good risk management took Santander to the top
Abbey for Intermediaries managing director Alan Mathewson and chief credit officer Iain Laing talk to Sarah Davidson about Santanders’ prudent approach to lending and a strategy to automate as much as they can
Santander understands crises. At the grand old age of 153 the bank has lived through civil wars, world wars, multiple economic crashes across the globe and survived in rude health. How? Prudent risk management is engrained in its DNA. So say the top two at Abbey for Intermediaries, the brand through which Santander deals with mortgage brokers after the conflation of Alliance & Leicester into AfI.
Originally an Abbey man, Alan Mathewson (left) has been with the business for fifteen years but was appointed managing director of AfI in May this year. Iain Laing (right), also formerly Abbey, is chief credit officer at Santander and he’s where the buck stops when considering who the bank lends to. His presence at our interview is testament to just how seriously the bank takes risk. “It’s very rare that you find a bank the size of Santander that has good risk management as one of its USPs,” says Laing. “But Santander has a very simple idea of what it’s about. Good risk management, efficient management and good sales management. “Santander’s history is of making steps
forward when the world and markets are in crisis. Deep in the DNA of the firm is the idea that we’ve made ourselves successful by holding resources in reserve and maintaining a strong balance sheet when everybody else is too aggressive,” he adds. “We’re all about a prudent approach to lending,” adds Mathewson. “The reality is that vanilla is good just now.”
RIsk In pRacTIce This focus has prompted some frustration from intermediaries – not just in relation to AfI. One of the favourite phrases kicking around the mortgage market at the moment is “computer says no” and it is a perceived problem across all the big lenders.
Intermediaries and borrowers alike are being turned away by lenders on a far more frequent basis than anyone has been used to in the past. Much mud has been slung at the practice of credit scoring as frustration with the limited amount of mortgage finance available locks many formerly prime customers out of the market.
“Our strategy is to automate as much 36 mortgage introducer NOVEMBER 2010
of the mortgage process as we can,” explains Laing. “The faster we give brokers and customers a yes or no decision the sooner they have a chance, if it’s a no, to shop elsewhere. “We want to be clear and quick so
brokers understand what sort of business we’re looking for. Around 80% of our applications should be salaried, vanilla and go through the system without touching the sides.” Credit scoring is the means to achieve that goal, and as Santander’s key credit man, Laing is keen to dispel some of the myths surrounding the practice. “Score cards review hundreds of
different criteria and weight them to give a lender a view on what credit someone has held and how it’s performed,” he says. “The job of a risk officer is to predict how likely a default is, not ascertain whether a customer has missed a payment. It’s not about whether you’ve missed a payment.” This is a subtle but important point. Part of the frustration from borrowers and brokers is that seemingly “good” prospective borrowers are being turned down.
“I’m going to lend for 25 years to
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