It isn’t Funny Money: New program lets VT students learn banking through loans with real money

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The Virginia Tech Foundation is committing $2 million over four years to establish Credit Corps. Finance professor George Morgan and finance students Quillin Gaffey (left) and Tracy Christensen presented the proposal at a meeting of the finance department’s advisory board in New York in April 2019.

This fall, Virginia Tech students have a remarkable new learning opportunity that let them gain experience in banking and risk management by participating in actual loans with their bank partners with real money from the Virginia Tech Foundation.

Known as the Credit Corps, the unique experiential learning program is aimed at enhancing students’ skills in credit risk analysis, business analytics, teamwork and portfolio management.

“Credit Corps will prepare students for jobs and careers across a wide range of finance career paths and offer financial firms a pipeline of credit-savvy recruits with hands-on experience,” said finance professor George Morgan, who led the efforts to develop the program.

At the same time, the program seeks to earn a competitive return for the Virginia Tech Foundation, Morgan said. The foundation is committing $2 million over four years, or $500,000 a year, to sponsor the program.

“Credit Corps will essentially operate as if in a loan syndicate led by the partner bank that provides funds to the borrower,” he said. Atlantic Union Bank has signed on as the program’s inaugural partner, providing loans Credit Corps may consider for participation.

Based in the Department of Finance, Insurance, and Business Law in the Pamplin College of Business, the program is a one-of-a-kind capstone experience, Morgan said. A few other universities offer experiential learning programs related to bank lending and venture capital, but Morgan said he is not aware of other programs in which undergraduate students lend real money to commercial borrowers.

Credit Corps students will be functioning as commercial loan officers, he said. Their responsibilities will include reviewing financial statements, interviewing management at the borrowing companies, identifying risk issues and managing fund inflows and outflows as repayments are made and new loans are considered.

The program is a capstone in the finance major’s risk management and banking option. Students in that option must take core courses in investments, corporate finance, fixed-income securities, credit-risk analysis and advanced modeling and business analytics in addition to elective courses during their junior and senior years.

Before they can be considered for Credit Corps in their senior year, students must earn certification from the Risk Management Association.

And after they do their due diligence and come to a loan decision, the students must submit their recommendation for approval by an advisory committee comprising three finance industry professionals and two finance faculty members.

Morgan worked closely with senior banking executives and Pamplin alumni John Asbury (Atlantic Union Bank CEO), Mike Clarke (Atlantic Union Bank board member), and Mark Moore (Atlantic Union Bank commercial regional president) to develop the capstone experience and to revamp the banking option. The finance department and those and other alumni, Morgan said, wanted to re-ignite interest in banking as a study area and career.

“Students don’t fully understand how integral banking is to a high-functioning economy that generates jobs and wealth for people,” he said. “They have not seen the complexity of the problems that have to be solved or the consulting-type relationships with corporate clientele. With its focus on certification, credit skills, hands-on learning and connections with alumni, the new option can change all that.”

With Credit Corps, “they get to invest real money in sophisticated assets,” Morgan said. “They acquire key skills for careers in diverse finance fields such as corporate banking, commercial banking, investment banking, private equity/debt funds, asset management or corporate finance.”

The partner banks will provide the students educational workshops and case studies, as well as access to data and, whenever possible, to the senior management of the borrowing companies. (Borrowers involved in the program provide their consent in advance.) In addition to being a source of loan considerations for Credit Corps, the partner banks will also service the loans in which Credit Corps participates.

The benefits for partner banks, Morgan said, include the development of a pipeline of superior young talent that is credentialed by the leading professional association and early identification of the best candidates for internships and employment.

Credit Corps follows the footsteps of SEED and BASIS, two long-established programs the finance department pioneered to give students experience in stock and bond investing by managing two separate funds of $5 million each for the Virginia Tech Foundation.

The plan for Credit Corps is to start small, Morgan said, with one team of a half-dozen students in the first year and to grow within two years to 20-plus students, working in several “deal teams.”

Longer-term, the goal is to double the current number of finance graduates with at least a year of hands-on experience in risk management and banking.

“We have more work to do on several fronts, including soliciting additional bank partners,” said Morgan. “We are seeking at least two more partners for 2020 and beyond.”

 

— Written by Sookhan Ho