Loan Tape

Definition

Loan Tape denotes an electronic file or set of files that captures lending product data from a financial firm's systems. (Also: Loan Data Tape, Loan Exposures Tape, Servicing Tape, "Loan-by-Loan File"). It is typically a database extract that needs to be specified in detail (the "scope" of the extract) or spreadsheet.

The term likely originates in magnetic data tapes used in earlier generations of computer storage. A loan tape can be considered as a one-time snapshot of a subset of an organization's Credit Portfolio Information

Loan Tape Structure

The amount and type of detail included in a loan tape can vary greatly depending on use, but would normally be organized around some key "views". Those would include the following four categories:

• Debtor (obligor) related data which allow among others
  • Unique identification of the borrower / client
  • Credit Risk Analysis (e.g., using financial data and ratios)
• Loan level (product / facility) data that allow
  • Loan product characteristics that may link to specific risk factors
  • Loan exposure / amortization details that further determine the risk profile and allow more accurate valuation
• Collateral level data that allow assessment of residual risk and valuation
• Credit performance data (delinquency status etc.) allowing empirical credit scoring

A loan tape may contain a single "snapshot" in time or cover an extended historical period. In the later case data fields will be classified as either static (common across snapshots) or dynamic (having a time dependency).

There are not generally agreed standards around the organization of a loan tape. A discussion of existing standards is provided in the Risk Data Standards page.

Sampling Approaches

When the loan tape concerns Consumer Credit the number of underlying credit files is usually very large, which necessitates various forms of sampling and aggregation. The AQR Manual describes in detail such procedures.

Detailed Example

A detailed loan-level specification of data requirements is provided by the EBA NPL Template. (NB: The EBA templates target Non-Performing Loan portfolios and thus put more emphasis on recording the credit performance of credit assets)

Issues and Challenges

A perennial issue with loan tapes is the quality of the data (in terms of accuracy, completeness and other standard data quality criteria). The causes of poor data quality can be traced in general to any combination of

• the cost of maintaining accurate data, especially when involving manual processes
• heterogeneous and incompatible IT systems (typically the result of acquisitions)
• product complexity that is difficult to capture with limited datapoints

Data quality aside, neither wide availability nor processing of loan level data is trivial from a technical perspective. The lack of such information by end-investors has been mentioned as one of the causes of the financial crisis of 2008:

"Originators, arrangers, distributors, managers and credit rating agencies should strengthen transparency at each stage of the securitisation chain, including by enhancing and standardising information on an initial and ongoing basis about the pools of assets underlying structured credit products"