Monitoring is more than a monthly check.
Monitoring is the one process that touches every loan, every period. Capture it well and it opens up reporting, trend lines and what-if analysis. Plus the RBA's rate rise, Goldman's limits on Claude Code and ASIC on private credit.
Hi folks,
This week a private credit team came to us about monthly loan monitoring and ended up talking about everything else their monitoring data could do. We keep having this conversation.
What we're seeing.
Monitoring is more than a monthly check
Monitoring usually gets treated as one question: how did each borrower go this period? You collect the pack, test the covenants, write it up and move on to next month. The answer goes in a folder and rarely gets used again.
But monitoring is the one process that touches every loan, every period, for the life of the loan. Once a deal is signed, nearly everything you know about it passes through here: the numbers, the covenants, the amendments, what management told you, what you decided and why. Most teams already do this work by hand. They just don't keep it in a form they can use again.
Capture it in one place, with every figure traced to its source, and each cycle adds to a history you can query. It's the shift from system of record to system of work we shared a few weeks ago, where the record is a by-product of the monthly work.
Here is what that opens up:
- You can spot change early. Compare periods and you pick up shrinking covenant headroom or weakening cash flow before a breach. Something a borrower said nine months ago can be connected to what is happening today.
- You can see the whole book. You can pull trend lines on covenants, LVR by sector and interest cover across the portfolio. Add sector and macro data, and you can ask whether pressure on one borrower could reach others.
- Reporting gets easy. Today every request means hunting through files. With the data together, the committee pack, the net yield or an investor's quarterly template starts from a question, in the format you need. This is the analytics behind your reports. What goes to investors stays in your own voice.
- You can look forward. You can ask what happens if a borrower's revenue falls 10%, if you give an interest holiday, or if you add two new loans to the portfolio. One team told us this week they expect that kind of work to go from a 24-hour turnaround to under an hour.
- The book stops depending on one person. When an analyst is away or moves on, anyone can pick up a borrower's history.
- It reaches the rest of the loan's life. Amendments, waivers, valuations, provisioning, due diligence questionnaires and exits all draw on the same record.
That last point is why we started with monitoring. Almost everything that happens after a deal is signed can run on the same record, and we think that's where this goes.
In the mix.
- The RBA lifts the cash rate to 4.85% (RBA)
- On Tuesday the board raised rates by 25 basis points, in a 6 to 3 vote. It now expects inflation to reach the top of its target band only in late 2027, about three quarters later than it forecast before, and says the economy is slowing. It also named AI-related investment as a driver of rising prices for technology goods.
- Our read: floating-rate borrowers pay more just as growth slows, so interest cover tightens across the book. A good week to ask which borrowers are closest to their covenants, and how quickly you could answer that.
- Goldman takes Claude Code back from its bankers (PYMNTS, on Bloomberg)
- After months of access, Claude Code and GitHub's AI coding tools are now for engineers only. Traders who used them to monitor client flows and build materials are reportedly frustrated. Goldman says the tools go to those best suited to them.
- Our read: this makes sense to me. Tools built one at a time by non-engineers are hard to maintain or audit, and we're seeing fund analysts build models the same way. I'd assume traders are getting something like Claude Cowork instead, though the report doesn't say.
- ASIC says a private credit report is coming "shortly" (ASIC)
- At Senate Estimates last Thursday, ASIC said it is tracing $3.4bn lent to the collapsed Bathla Group across more than 500 companies and 40 lenders, and called poor private credit practices "an enforcement priority".
- Our read: expect more questions about what you hold and how you check it. They are much easier to answer when your data is in one place.
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