Business — Banking — Management — Marketing & Sales

Delegation of Authorisations

Category: Strategy Implementation

Range of products

Normally, a branch network can only sell products authorised by the head-office, with details given for each of the product (minimum and maximum size by operation, margin or fee depending on the size). When an operation, on a customer’s request or because a branch may think about a specific offer well adapted to its market, a special authorisation or framework of possibilities is to be discussed between the branch and the head-office.


As already mentioned before, credit risk is the most important risk a bank has to address. The key task is thus to establish a solid credit risk framework, with the methodology being determined and validated at the head-office level. The quantity and quality of the people working in that area are fundamental for the bank. Regarding the authorisation, for the branches, to deal with the customers, there are two possibilities:

For the normal range of private clients, being rarely customers of more than a few branches of the same banking group, general criteria will be determined by the head-office and given to the branches. It relates usually to the customer’s revenue and assets, customers being very often ranked to show their worthiness and solvability (for instance, a rank from 1 to 5 or stars). Then, once a client accepted for operations involving lending issues, such as an overdraft or a mortgage, the size of the operation will depend on criteria also pre-determined. They are linked to the capacity of the customer, taking into account his (her) assets and revenue, to reimburse its short-term or long-term borrowings. This capacity is generally expressed with a ratio. For instance the reimbursements should not exceed 25%-30% of the salary, except if enough customer’s assets, easily usable or sellable, are kept with the bank.

For major customers, such as big companies or private clients representing a potential significant credit exposure, the credit department of the head-office usually determines a global authorisation, and follows up the global exposure of the bank related to these clients. Some authorisations cold be delegated to the branches having the principal account of the customer. In addition, specific authorisations could be given on a case by case basis, with the branch discussing a proposal with the head-office.

Market risk and funding issues

As explained before, the branches should not have the authorisation either to do their own funding or to have market risks. These two elements should be managed at the head-office level. If, in exceptional case, because of national or regional characteristics, some branches have to manage this type of exposures, it would be within a precise framework determined with the departments in charge at the head-office’s level.

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