Generative AI and the New Loan Review Process

The evolution of banking and risk management over the past few decades has been nothing short of remarkable. From paper-ledger loan reviews to digital spreadsheets and now to artificial intelligence, each leap has brought efficiencies that reshape how financial institutions assess credit risk.

Generative AI in credit risk management is the latest step forward, offering a transformative approach to loan review. By streamlining processes, improving accuracy and providing deeper insights, AI is set to redefine risk assessment for banks and credit unions.

Mitigating Risk and Increasing Consistency

One of the biggest challenges in credit risk management is ensuring consistency across reviews. Traditional methods rely on individual experience and manual checks, which can introduce variability and human error, especially as individual loan reviewers’ years of experience trend downward. Generative AI in credit risk management addresses these concerns by standardizing reviews, applying consistent risk parameters and identifying patterns that might be missed by even the most experienced analysts.

For new analysts, AI acts as a built-in training tool, providing real-time guidance and helping them get up to speed faster. Kirby said, “Loan Review Assistant is a wonderful training tool for newer analysts, allowing us to reduce the time needed to onboard them while maintaining high-quality risk assessments.”

With AI handling repetitive tasks, loan review professionals can concentrate on complex cases that require human expertise.

A New Era of Loan Review Efficiency

Loan review teams have long faced challenges balancing speed, accuracy and staffing constraints. As financial institutions deal with growing portfolios, evolving regulations and a shifting workforce, maintaining consistency in credit risk assessment is more difficult than ever.

This is where tools like Abrigo’s Loan Review Assistant, powered by generative AI, make a difference. As longtime banker and risk management Senior Consultant Kent Kirby explains, “Loan Review Assistant is the kind of tool that makes you wonder how you ever survived without it.” The AI-driven solution enables loan review teams to complete assessments in seconds, ensuring that documentation is accurate and that potential risks are flagged early.

By reducing time spent on manual processes, generative AI in credit risk management empowers financial institutions to focus on strategic decision-making rather than data entry.

Meeting Compliance and Regulatory Expectations

Compliance remains a top priority for financial institutions, and regulators are increasingly focused on credit risk oversight. Generative AI in credit risk management helps institutions stay compliant by maintaining detailed audit trails, ensuring transparency and aligning with regulatory standards.

Data security is also a major concern. Addressing bankers’ worries about utilizing AI-powered tools, Kirby reassures, “Yes, it’s secure. Abrigo knows better than to mess around with data privacy in banking. These tools are built with data encryption, robust access controls and compliance baked in from the start.”

AI doesn’t just help loan review teams work faster, it helps them provide regulators with clear, consistent documentation, reducing the risk of compliance issues and improving overall governance.

Better Risk Insights, Better Decisions

Ultimately, the goal of generative AI in credit risk management is to help financial institutions make better lending decisions. By improving efficiency, accuracy and consistency, AI-driven solutions like Loan Review Assistant not only reduce workload but also enhance risk assessment capabilities.

Just as technology has transformed banking over the decades, AI is now changing the way financial institutions manage credit risk. Kirby advises loan reviewers to embrace the process.

“When something new comes out, there is always the concern of its sustainability. Twenty-five years ago, there was a fear that all automated systems were flashy, overhyped tech gimmicks, but today they are the differentiators between adaptable community banks and their competition,” he said. “This is a practical, well-designed solution that makes life easier for those of us in the trenches of risk management. It helps us work faster, more accurately and without the headache of manual documentation. It’s the kind of tool that pays for itself in saved time and improved portfolio insights.”