ACH transactions put the Bank at risk because ACH rules require that the Bank commit to fund these transactions one or two days prior to their settlement dates (settlement dates are the dates our Bank debits customer accounts). Thus, there are inter-day exposures to the Bank in ACH transactions. Because of this credit risk, the senior loan officer will assign a commercial loan officer to each ACH customer. These loan officers will underwrite ACH customers and transactions using the following procedures:
• An ACH file limit will be established for each ACH authorized for an ACH customer. These limits will be established through discussions with ACH customers and will be based on the maximum dollar amount of transactions likely to be outstanding during any settlement period.
• For each customer the loan officer will calculate a total ACH exposure. This exposure is the sum of the exposures for all of that customer’s ACH activities. Exposure is based on the maximum dollar amount of transactions likely to be outstanding during any settlement period.
• After the exposure has been quantified, the loan officer will evaluate the risk associated with this customer by considering such things as: (1) the character and reputation of the business, owner, or manager; (2) the type of business or organization involved, (3) the types of payments and/or deposits that will be involved, their funding and their timing, (4) whether the risk is debit, credit, or both, (5) the history of the customer’s relationship with the Bank, (6) appropriate credit reports D&B Credit Bureau, etc, and (7) customer financial statements.
• After this analysis is complete the loan officer will ask the chief credit officer or credit administration for authority to routinely approve all ACH transactions up to specified limits. Requests for approvals will normally be in a memo addressing the above topics and the memo should be accompanied by copies of the firm’s financial statements.
• The chief credit officer or credit administration will establish a pre-approved, uncommitted internal guidance ceiling for each ACH customer. Thereafter it will be the responsibility of the assigned loan officer to administer the account.
• Some businesses will be seasonal and will require temporary increases in limits during peak season activities. This should be considered at the time of initial approval.
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CRCM, CLBB