Waived Exceptions
In banking, exceptions occur when circumstances fail to meet predetermined requirements. Missing signatures in a document, expired insurance policies, and past-due tasks are examples of exceptions. A “waived” exception is one deemed unnecessary to resolve through normal means, such as collecting a document from a customer or member.
Waived Exception Example
Keeping exceptions to a minimum is an important priority for risk mitigation and compliance. So, why would a financial institution decide to waive an exception instead of resolving it?
For purposes of illustration, let’s assume that your financial institution commonly requires pay stubs from loan applicants. However, one of your long-time customers is a self-employed farmer who is not compensated through a traditional payroll system. Although verification of income is still important, your institution might decide to waive the pay stub exception due to the borrower’s specific situation.
Challenges of Waiving Exceptions
Allowing staff to waive certain exceptions offers additional flexibility to accommodate unique situations. However, waived exceptions can also pose challenges for financial institutions.
Tracking Issues: Deciding to waive an exception does not dismiss the financial institution from proper recordkeeping. Rather, waived exceptions should be thoroughly documented along with the rationale that went into the decision.
Incorrect or Excessive Use: Team members may feel tempted to waive exceptions out of convenience rather than necessity. Regularly monitoring waived exceptions is a smart practice for avoiding incorrect or excessive use.
Compliance Risk: Waived exceptions that lack adequate context could raise questions from auditors and examiners, which speaks to the importance of detailed tracking.
Managing Waived Exceptions
Some financial institutions track waived and other exceptions in spreadsheets. Spreadsheets are easy to create and customize but offer minimal control and accountability. Other financial institutions track waived exceptions with ECM software. For example, AccuAccount from Alogent provides a built-in capability for identifying waived exceptions, adding comments, and reporting on recently waived exceptions.
Explore Alogent’s ECM industry papers or read our banking definitions.
