EXUS Collections & Recovery Blog

3 Evolving Collections Needs European Banks Must Address

Posted by Chris Maranis on Tue, Jul 01, 2014 @ 10:00 PM

collections and recovery in retail bankingToday’s banks face the lingering effects of crisis head on. They have limited capabilities for new business and the consequences of the credit crunch are front-and-center, with a direct impact on bank operations: 

Rising unemployment and taxpayer burden is hardly ideal. Without the ability to rely on new business as a revenue generator, banks instead have to turn to new strategies to compensate for loss.

Are there methods to improve returns without risking additional losses?

More streamlined, efficient collection and recovery processes built through tech-savvy solutions for retention and growth are one way to get book balances back to black. Today’s banks have a need (and an opportunity) to reassess these operations in response to battered balance sheets and market trends. 

If it’s broke—fix it. For European banks, that means addressing three key evolving collections needs.

1. The Rise in Non-Performing Loans

Previously, we have addressed the non-performing loan problem and banks’ need to respond to the issue. The problem is particularly acute in Europe, but spans worldwide:

Failure to address these concerns means more non-performing loans will be accrued, which only postpones recovery and stalls profitability. To cope, banks must consider:

  • Which of their accounts are at the greatest risk of not performing?
  • What causes these core accounts to not perform?
  • What measures could be put in place to meet payment challenges and decrease risk of accounts not performing?

2. Stricter Regulatory Requirements 

In response to downward trends, the international Basel Committee on Banking Supervision issued a set of reforms (Basel III) with the following overarching focuses:

  • Capital, with associated risk coverage and leverages.
  • Risk management and supervision.
  • Market discipline.

For specifics around each pillar, take a look at this overview table created by the Bank for International Settlements. Stricter regulations in these areas mean greater attention to detail in process is absolutely necessary to ensure compliance. Ask yourself: 

  • How thoroughly are processes documented? How are formal records kept?
  • How rigorous is your credit analysis?
  • How does your team account for risk, unsecuritised product and liquidity? 

Banks must discuss and document proof that policies and procedures are up to new standards, particularly as rumors circulate that Basel IV is on the horizon. KPMG explores what this could look like here

3. Alternative Ways to Grow Now Required

With non-performing loans on the rise, banks must adapt to become much more efficient and tech-savvy in collections and recovery to stay profitable—since they cannot rely completely on new business if they want to grow. 

They must: 

  • Rethink and reassess current processes—what can be streamlined or evolved?
  • Monitor trends for new threats and compliance requirements. Become industry experts and adjust processes to stay ahead.
  • Invest in a comprehensive collections and recovery solution that helps your business do it all, through each step of the credit risk cycle, from loan origination to debt resolution.

Can Your Business Meet the Needs of a Changing World? 

Download our free whitepaper, Collections and Recovery: Meeting the Needs of a Changing World, to learn how to rethink successful collections and recovery practices.

free collections and recovery whitepaper: http://marketing.exus.co.uk/collections-and-recovery-meeting-the-needs-of-a-changing-world
Chris Maranis

Written by Chris Maranis

Topics: Collection and Recovery Operations