Why has First Republic Bank's Eagle Lending program for business loans experienced a 20% drop in approval rates compared to the previous year?

Introduction

The 20% drop in approval rates for First Republic Bank's Eagle Lending program for business loans is a significant issue that requires thorough investigation. This analysis will systematically identify, validate, and address the root cause while considering both immediate and long-term implications for the bank's lending operations.

Step 1

Clarifying Questions (3 minutes)

• Looking at the timing, I'm thinking there might be a seasonal component. Has this 20% drop been consistent across all quarters, or is it more pronounced in certain periods?

Why it matters: Seasonal fluctuations could indicate external factors rather than internal issues. Expected answer: The drop has been consistent across quarters. Impact on approach: If seasonal, we'd focus on year-over-year comparisons and industry trends.

• Considering potential changes in loan criteria, have there been any recent adjustments to the Eagle Lending program's approval requirements?

Why it matters: Changes in criteria could directly impact approval rates. Expected answer: No significant changes to approval criteria. Impact on approach: If criteria have changed, we'd need to evaluate the impact of these changes on approval rates.

• Thinking about market dynamics, has there been a shift in the types of businesses applying for loans through the Eagle Lending program?

Why it matters: Changes in applicant demographics could affect approval rates. Expected answer: Some shift towards riskier industries. Impact on approach: If confirmed, we'd need to analyze risk assessment models and industry-specific factors.

• Considering internal processes, have there been any recent changes to the loan approval workflow or the team handling approvals?

Why it matters: Process changes could inadvertently affect approval rates. Expected answer: No major changes to the approval process. Impact on approach: If changes occurred, we'd focus on process optimization and team training.

• Reflecting on data integrity, can we confirm that the method for calculating approval rates has remained consistent and that all systems are functioning correctly?

Why it matters: Ensures we're comparing apples to apples and not dealing with a data anomaly. Expected answer: Calculation methods and systems are consistent and functioning properly. Impact on approach: If inconsistencies are found, we'd prioritize data validation and system checks.