Real-Life Decision Making
Bankers are usually the first people to know when a business is in trouble.
They monitor the financial situation of their customers every month and they
know when loan payments or payments to other businesses fall behind.
"Account managers have to be very careful about how they share this information,"
says Tim Russell, a commercial account manager. "When other banks want to
know how one of your clients is doing, when they want a credit check done,
you have to tell them the truth. You have to tell them about your client's
history of paying off loans."
All commercial account clients agree to this when they do business with
a bank.
"Where we run into difficult decisions is when we have other information,
outside of their monthly payments, that shows them to be a bad risk," says
Russell. "Do we tell or not?"
Here's a real-life example from Russell's files:
A large engineering firm has been dealing with your bank for many years.
They've always paid their loans on time and have a good reputation in the
business community. Despite this, the firm has assessed its financial situation
and realizes that it will have to file for bankruptcy. As the commercial account
manager for this firm, you have attended meetings to begin the bankruptcy
process.
In the meantime, the firm is still trying to carry on its business. Another
bank calls you for a credit check on the firm because one of their clients
wants to sell the firm a piece of equipment. They want to know if the firm
has the ability to pay for the equipment.
According to the rules of confidentiality in banking, you may only tell
them about the firm's loan payment history. But you also have an obligation
to not lie "by omission" (by not telling the whole truth) to the other bank.
You know that the firm will not be able to make monthly payments to pay
for this piece of equipment.
What do you do?