Blog · AutoCredit
Policy deviations belong in the draft, not in the committee room.
When a credit committee discovers a deviation, the meeting turns into an investigation. When the memo declares it, the meeting can do its real job.
Every lender has a credit policy, and every lender approves files that sit outside it. That is not a failure of discipline. Policy bands are written for the typical case, and real borrowers are not always typical. A business with seasonal cash flow, a promoter with a thin bureau history but strong banking, a FOIR slightly above the band with a good reason: these are ordinary credit judgements.
What goes wrong is not the deviation itself. It is when and how it comes to light.
What happens when a deviation is discovered
Picture a familiar committee meeting. A member reads the memo, does a quick calculation in the margin and notices that obligations look higher than the memo suggests. The questions start. Was this considered? Who signed off? Why is it not in the note? The analyst is asked to come back next week. The file waits, the borrower waits, and the committee has spent its time doing analysis that should have been done before the meeting.
Worse, the members learn something: that memos cannot be taken at face value. From then on, every file gets the same suspicious re-reading, and committee time grows for every file, clean or not.
Why deviations go unmentioned
It is rarely deliberate. More often:
- Each analyst writes the memo in their own way, so there is no fixed place where deviations must be listed.
- The policy bands live in a document, not in the analysis, so nobody checks the file against every band.
- Calculations are done in personal spreadsheets, so two analysts reach slightly different figures.
- There is an unspoken sense that a memo full of exceptions looks weak.
None of these is solved by telling analysts to try harder. They are solved by changing what the memo is built from.
What a declared deviation looks like
A memo that declares its deviations does three things for each one:
| Element | What it says |
|---|---|
| The band | Which policy parameter the file falls outside, with the policy reference |
| The evidence | The figure, cited to the document it came from |
| The case | The analyst’s reason the file still merits approval, or the conditions proposed |
The committee then reads a list, not a mystery. It can accept, reject or add conditions to each deviation in turn, and its comments go on the record against that line. Discussion moves from “what is this?” to “is this acceptable?”, which is the question a committee exists to answer.
Make it a property of the system, not of the analyst
The reliable way to get declared deviations is to place every file in the policy bands automatically and flag anything outside them in the draft, before a human writes a word of justification. That way the list is complete by construction. The analyst’s effort goes into the part only a person can do: explaining why the exception is or is not reasonable.
It also helps to use the same memo format for every file. When deviations always appear in the same section, committee members know where to look, and a memo with an empty deviation section means something.
How we approach it
AutoCredit places each file in your policy bands and drafts the memo with deviations flagged and the policy reference attached, never hidden. Every line is cited to its source, the calculations are the same for every analyst, and credit officers and the committee make the decision, with their comments kept on file. For the structure of the memo itself, see our credit appraisal memo format guide; for the documents that feed it, the loan file document checklist. All our material is in the AutoCredit guides.
The aim is not fewer deviations. It is no surprises.
Questions
Are policy deviations a bad sign in a credit file?
Not by themselves. Policy bands are written for typical cases, and good borrowers sometimes fall outside them for sound reasons. What matters is that each deviation is declared and justified.
Where should deviations appear in a credit memo?
In a fixed section of every memo, each with the policy reference, the cited figure and the analyst’s case, so the committee can decide on each one.
How do you make sure no deviation is missed?
Place every file in the policy bands automatically and flag anything outside them in the draft, so the list is complete before a person writes the justification.
See it on your own data. AutoCredit — The credit memo, drafted and cited. Book a 30-minute working session with an engineer.