In this article, we have looked at three-time horizons (now, next and beyond) to underpin how to best review and improve some of the bank’s lending practices.
Reflecting on the NOW, it is clear that we are all still navigating uncertainty. Since the start of the pandemic, banks have been providing the Belgian economy with some much-needed “financial oxygen”. They have been doing so via the state guarantee frameworks as well as the payment holiday arrangements.
While financial institutions have rapidly shifted to serve clients struggling with the lockdown measures, they also had to cope with their own difficulties and complexities arising from the COVID-19 context.
The lockdown and resulting payment holiday turned off some traditional Early Warning Signals like Days Past Due (DPD). Besides, credit models were not designed for pandemic economies, and determining macro-economic scenarios is quite challenging.
On top of this, it is rather obvious that COVID-19 has dramatically impacted the day-to-day operations of banks. Full-time remote working, combined with new supporting measures has put additional stress on the different functions active in the lending lifecycle. Fortunately, financial institutions can use many levers to make their operations more resilient and lower both acquisition and service lead times. These have to be complemented with human capital drivers, to ensure staff wellbeing and productivity is maintained in the new normal, meaning more teleworking.