Covenants Monitoring Software Use Cases for Treasury Team
Treasury teams in publicly traded companies are responsible for ensuring compliance with various financial covenants related to their debt agreements, credit facilities, and other financial obligations. Covenant compliance tracking is crucial to avoid defaults, maintain favorable credit ratings, and ensure smooth operations. Here are the key types of covenants and compliance tracking needed for treasury teams in publicly traded insurance companies:
1. Financial Covenants:
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Debt-to-Equity Ratio: Monitoring the ratio of total debt to shareholders' equity to ensure it stays within agreed limits.
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Interest Coverage Ratio: Tracking the ratio of earnings before interest and taxes (EBIT) to interest expenses, ensuring the company can cover its interest payments.
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Leverage Ratio: Ensuring the company's total debt relative to its earnings before interest, taxes, depreciation, and amortization (EBITDA) stays within a certain range.
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Minimum Net Worth: Ensuring the company's net worth does not fall below a certain threshold.
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Liquidity Ratio: Monitoring current or quick ratios to ensure the company maintains sufficient liquid assets to meet short-term obligations.
2. Performance Covenants:
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Operating Metrics: Tracking key operating metrics such as combined ratio, loss ratio, or expense ratio to ensure the company meets performance benchmarks.
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Reserve Requirements: Ensuring adequate reserves are maintained for policyholder obligations, as required by regulators and financial agreements.
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Asset Quality: Monitoring the quality of the company’s investment portfolio, ensuring it meets stipulated credit quality requirements.
3. Reporting Covenants:
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Financial Reporting: Regular submission of financial statements, including balance sheets, income statements, and cash flow statements, to lenders or regulatory bodies.
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Compliance Certificates: Issuing compliance certificates that confirm adherence to financial covenants, usually on a quarterly or annual basis.
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Regulatory Filings: Ensuring timely submission of required reports to regulatory authorities, such as the SEC, to demonstrate compliance with relevant laws and regulations.
4. Affirmative Covenants:
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Maintenance of Insurance: Ensuring that adequate insurance coverage is maintained on the company's assets.
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Payment of Taxes: Verifying that all taxes are paid on time and that no tax liens exist against the company.
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Legal Compliance: Ensuring the company complies with all applicable laws and regulations, including environmental, labor, and financial regulations.
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Use of Proceeds: Tracking the use of funds from debt issuances to ensure they are used for agreed purposes.
5. Negative Covenants:
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Restrictions on Indebtedness: Monitoring new debt issuance to ensure it does not exceed agreed limits.
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Restrictions on Dividends: Ensuring dividends paid to shareholders do not violate covenant restrictions, particularly those related to maintaining sufficient capital.
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Restrictions on Asset Sales: Ensuring significant asset sales or disposals are within agreed limits or receive required approvals.
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Restrictions on Investments: Monitoring investments to ensure they do not breach agreed limits on risk, geography, or asset class.
6. Event of Default Clauses:
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Cross-Default Clauses: Ensuring that defaults on any financial obligations do not trigger cross-default clauses that could affect other debt agreements.
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Material Adverse Change (MAC) Clauses: Monitoring for any events that could be considered a material adverse change, which could trigger a covenant breach.
7. Documentation and Audit Trail:
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Document Management: Keeping detailed records of all financial agreements, compliance certificates, and correspondence related to covenant compliance.
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Audit Trail: Maintaining a thorough audit trail of all actions taken to demonstrate compliance, including internal approvals, document submissions, and communications with lenders or regulators.
8. Regulatory Compliance:
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Solvency Requirements: Ensuring compliance with solvency regulations imposed by insurance regulators.
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Capital Adequacy: Monitoring and reporting on the company's capital adequacy ratios as required by regulatory bodies.
9. Covenant Waivers and Amendments:
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Waiver Tracking: Tracking any waivers obtained for covenant breaches and ensuring all conditions for waivers are met.
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Amendment Monitoring: Ensuring any amendments to covenants are documented and complied with.
10. Communication and Collaboration:
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Stakeholder Notifications: Ensuring timely communication with internal stakeholders, including the board, senior management, and legal teams, regarding covenant compliance status.
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External Communication: Managing communications with lenders, rating agencies, and investors regarding compliance status and any potential covenant breaches.
By effectively tracking these covenants, treasury teams can manage risk, maintain financial stability, and support the company's overall strategic objectives.
Covenant Tracking & Monitoring are important part of managing borrowers financial and reporting documents for loan monitoring. Almost 70% of banks still rely on some combination of spreadsheets, core ticklers, or other manual processes.
BankStride is a digital banking platform you've been waiting for. BankStride makes it easy for banks to automate loan documents, exceptions tracking, loan reporting and covenant monitoring. No more managing checklists, searching for files in emails, or waiting on updates from other parties. Just create your requests and let BankStride do the work for you.
Many Banks and lending companies depend on non-public client information to provide their
services. Examples include:
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Automate Document Gathering
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Checklist For Loan Reporting Requirements
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Frictionless Customer Experience To Send Documents
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Create Credit Exceptions & Tickler Tracking
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Automated Loan Monitoring and Loan Compliance
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Loan Reporting, Risk & Financial Reporting
Without a dedicated tool, professionals would have to manually manage checklists and calendar
events to keep track of all required information. BankStride automates this work while improving
security and reporting.
Why BankStride platform
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BankStride is a web-based software solution for commercial banks and credit unions that works with customers to manage loan agreements and eliminate credit exceptions. FileStride improves credit exception management by reaching beyond the walls of the bank to work directly with customers.
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BankStride is like autopay for customer information.
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With BankStride, banking teams can schedule recurring requests for documents like financial statements and tax returns, compare actual and threshold covenant values (e.g. minimum DSCR), and send compliance certificates for signature via DocuSign.
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Customers respond to information requests much like paying an online invoice – they clearly see what’s required of them and they act. Customers can respond using a login-less portal or by email – no account or password required.
How does this help banks
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A borrower’s risk profile can change significantly over the years that follow a lending event. Managing loan agreement adherence through reporting and internal monitoring is an ongoing and tedious battle for banks.
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Banks that pursue superb loan agreement management are faced with handling complex recurring tasks using the basic tools of email, spreadsheets, and calendar ticklers. Banks that let this work fall behind risk delaying their awareness of problematic loans or operating practices, jeopardizing capital and reputation.
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With BankStride, banks gain high-resolution loan agreement monitoring that saves time and delights customers.
How does our bank customer use BankStride
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Our bank customer uses BankStride to schedule and automate the activities required to monitor loan agreements.
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For example, BankStride has proven effective in managing revolving lines of credit. BankStride automatically requests and reminds customers to submit monthly AR and AP listings, inventory analyses, and borrowing base certificates each month.
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BankStride reminds the banking team to test various financial ratios. The results of the customer’s actions and the ratio testing all roll up to per-banker and per-office reports that can be run on-demand in seconds.
BankStride is powerful for bankers
LOAN
MONITORING
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Track financial reporting, covenants, and certificates.
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Issue compliance certificates for signature via DocuSign.
REPORTS AT EVERY LEVEL
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Bank leadership can drill down to identify pockets of risk and underperformance.
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Every member of the team knows where to focus.
FLEXIBLE INFORMATION MANAGEMENT
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BankStride supports one-off and recurring information requests.
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Flexible storage layer configuration options available.
Easy for bank customers
NO USERNAMES
AND
NO PASSWORDS
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Customers receive tokenized links that enable portal access.
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Bankers can request information from anybody with an email address.
UPLOAD OR EMAIL
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Easy to use customer portals show the customer exactly what is needed.
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Email-based file ingestion enables customers to email files in response to requests.
TIMELY ALERTS
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Reminders and alerts are aggregated to prevent information overload.
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Alerts can be toggled per-user.
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Customizable reminder schedules.
STREAMLING LOAN UNDERWRITING, LOAN MONITORING, COVANENTS, FINANCIAL REPORTING
Automate Bank customer information requests for covenant monitoring , loan reporting, financial reporting and exception handling.
FiStride allows you and your customers to exchange information with zero friction so that you can reduce credit exceptions and recover valuable time.
The Workspace view in FileStride gives you a holistic overview of what you have, what you need, and where your customer stands.
Get a quick pulse check on where your projects stand with the Dashboard view in FileStride.
The Workspace view in FileStride gives you a holistic overview of what you have, what you need, and where your customer stands.
BANKERS STREAMLINE LOAN REPORTING DOCUMENTS
Know what you have, know what you need.
Why BankStride?
We're the digital banking solution you've been waiting for.
We make it easy to automate your loan reporting and covenant monitoring. No more managing checklists, searching for files in emails, or waiting on updates from other parties. Just create your requests and let BankStride do the work for you.
How it works
BankStride combines checklists with cloud storage to help you communicate and monitor your information requests and covenants.
All it takes to get started:
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Request items by creating projects for one-off items or templated lists.
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Review incoming files from your client and mark items as satisfied or complete.
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Repeat with automatically recurring requests and reminders.
Who it's for
BankStride is a solution for individuals, teams, and banks that need a better way to request information. We've facilitated thousands of customer relationships and transactions with teams in banking, accounting, consulting, and advisory services, just to name a few.
FEATURES
Bankers increase efficiency and improve loan risk and compliance with loan monitoring, reporting and exceptions.
Know what you have,
know what you need
Create recurring requests with status indicators, reports and automatic nudges that keep everybody in the know.
Many ways in,
password optional
Customers have the option to send files through email or a login-less portal. Either way, we get the files where they need to go.
Built to empower bankers
Track and monitor financial reporting, covenants, and certificates, and identify pockets of risk and non-compliance.
Structured for you and
your team
Add your colleagues with a single click, and manage access permissions so the whole team can get the job done.
We've facilitated over 1,000,000 client interactions...and counting.
