Commercial Lending Market Overview: The Calm before the Storm

October 21, 2002

Abstract

Boston, MA, USA October 21, 2002

Technology has been slow to advance in high-end commercial lending, where it is used primarily for workflow automation. As loan structures become standardized and pressure for a more liquid secondary market increases, solution providers will be forced to respond with more advanced features and functionalities.

The weakened economy is significantly shaping the market. The probability of borrower default has become greater while banks have become more risk-averse and fearful of portfolio deterioration. Banks are also less likely to hold onto assets and therefore beginning to look to secondary markets to unload distressed debt and lower their exposure to any single borrower.

"There is a push for greater liquidity in the secondary market to lower portfolio risk during today痴 turbulent times. Several factors are still making liquidity a challenge and preventing technology from being used to its full potential. But, as standardization in the commercial lending market slowly becomes a reality, the technology in this space will truly begin to take off. Current conditions are merely the calm before the storm," said Christine Barry, wholesale banking analyst at Celent and author of the report. A is available online.

of Celent Communications' Wholesale Banking research service can download the report electronically by clicking on the icon to the left.

        

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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents

 

Boston, MA, USA October 21, 2002

Commercial Lending  Market Overview:  The Calm before the Storm

Return to report Abstract

 

EXECUTIVE SUMMARY 3
INTRODUCTION 4
  Origination 4
  Loan Syndications 6
  Secondary Loan Trading 7
MARKET OVERVIEW 11
  Decreased Overall Lending 11
  Entrance of Non-Bank Lenders 12
  Dominance by a Few Large Players 13
  Active Secondary Trading Market 16
  Increased Global Focus 17
  Increased Use of Credit Derivatives Worldwide 17
BENEFITS OF DEPLOYING HIGH-END LENDING SOLUTIONS 20
LEADING VENDORS 22
  Alltel 22
  Automated Financial Systems (AFS) 25
  IQ Financial Systems 27
LOOKING AHEAD 32

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