Consistency in commercial loan pricing is a big issue. With equality in commercial loan pricing needed throughout a financial institution, a method is needed to measure one loan being priced with different characteristics than another loan. As an example a loan being priced to float with prime with a relatively short duration, and a fixed rate loan with a long duration should be expected to yield the same return to the institution. The calculations needed to ensure an equal comparison between the two loans are not intuitive. With a good computer assisted loan pricing system, these calculations can be done almost instantaneously with a high degree of accuracy. It is also essential the loan pricing model provide easy to understand output with confidence that the analytics behind the model are solid and indisputable.
Phill Rowley