AI Governance in Lending: What Institutions Must Own
AI tools can inform credit decisions. They cannot own them. The governance requirements for machine-assisted lending are not optional — and they cannot be delegated to a vendor.
Read articleThird-Party Risk6 min read
What Banks Should Require from a Capital Provider
Not every capital provider is the same. Banks and credit unions that route unsupported credit opportunities to third parties should apply the same diligence they apply to any significant third-party relationship.
When a financial institution routes an unsupported credit opportunity to a capital provider, it is entering a third-party relationship that carries regulatory, reputational, and relationship risk. The institution's name is associated with the outcome, even if the institution did not make the credit decision.
Banks and credit unions should apply the same diligence to capital provider relationships that they apply to any significant third-party arrangement. That means evaluating the provider's financial condition, regulatory standing, complaint history, data practices, and conduct standards before routing any customer opportunity.
Beyond initial diligence, institutions should require defined conduct standards. The provider should be prohibited from rebrokering the opportunity to another lender without consent. The provider should be prohibited from soliciting the customer for unrelated products. The provider should be required to report status and funding outcomes accurately and on time.
Institutions should also require defined relationship protections. The provider should be contractually prohibited from soliciting the customer's deposit, treasury, or other protected services during and after the credit relationship.
A governed channel provides these protections through executed agreements and product-specific schedules. An unmanaged referral provides none of them. The difference is the difference between a managed third-party relationship and an uncontrolled exposure.
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Read articleOutsourcing vs. Governing: The Right Question for Lending Platforms
The question is not whether to outsource lending platform functions. The question is which functions the institution must own and which it can source — and how to govern the boundary between them.
Read articleReady to discuss your institution's strategy?
Mainlynk works with financial institutions on governed capital pathways, specialty lending, technology selection, and AI transformation.