In the wake of the pandemic, the government acted quickly to provide financial Covid support packages to help struggling businesses. With the economy now recovering, Mike Hampson, CEO at Bishopsgate Financial explores the range of options available for banks to ensure that those loans are repaid.
Since the start of the pandemic, businesses have raised over £75bn[1] from banks and financial markets, through interest-free emergency support schemes. But the harsh reality is that not all loans will be honoured as the economy recuperates.
As a result, banking professionals with client relationship management experience and skills in supporting clients to repay loans in a challenging business environment, will be in high demand.
Setting up training capabilities for client support post-pandemic
Commercial bankers estimate 60% of new coronavirus scheme loans[4] will default or suffer other repayment issues that will drive previously unseen levels of non-performing loans. It’s a tough balancing act and one that demands careful management of the lending transaction lifecycle, from origination through to collection, recovery, and handling bad debts. Banks no doubt already have frameworks in place to manage these elements, but it’s highly important to make customer interactions as easy as possible and ensure their genuine concern for their customers is clear.
Subsequently, hundreds of workers at major banks including HSBC, NatWest and Metro Bank[5] are understood to be receiving training in how to deal with vulnerable customers and “demonstrate empathy” as the first wave of repayments for coronavirus loans fall due. Staff ‘sensitivity’[6] training builds on client-support and workout capabilities, such as improving sensitivity to early-warning systems, developing short-term forbearance solutions and loan modifications, and providing guidance on alternative products.
This approach may further avoid the additional pressure on the UK’s mental health crisis as financial institutions prepare to call in loans issued during the pandemic.
HSBC, which now has 400 staff in its debt collection team,[7] said the aim was to ensure staff had a “consistent understanding of vulnerability” and are “aware of the factors that could make an individual vulnerable” when having repayment conversations with customers.
An executive at another bank said its expanded debt collection team was being trained in “empathy, vulnerability and listening skills”. The individual told The Telegraph: “Ultimately, we don’t want to damage the economy by being overly aggressive.”
A peculiarity of a crisis situation is that customers don’t always know what they will need until that need is pressing. Finding that their bank is prepared to help in unexpected ways will go a long way toward reassuring them.
[2] https://www.law360.com/articles/1355897/
[3] https://www.bishopsgate-financial.com/insights/the-change-perspective/the-change-perspective-2021
[4] https://www.grantthornton.co.uk/insights/how-to-manage-upcoming-non-performing-loans/
[5] https://industryslice.com/NewsLetter/8_33
[6] https://www.telegraph.co.uk/global-health/climate-and-people/covid-19-has-amplified-parallel-pandemic-poor-mental-health/
[7] https://www.msn.com/en-gb/money/other/bank-staff-get-sensitivity-training-before-calling-in-covid-debts/ar-BB1fNMte
