BankingBook Analytics logo

Road to Recovery: A Strategic Planning Blueprint

ARTICLE| Wed Feb 12 2020

As the debt forgiveness period winds down, concerns about what happens in the post-debt holiday period begin to emerge. Most financial institutions, including mortgage insurers, offered a three to six month deferral period to retail and non-retail borrowers. According to BBA’s research, an estimated 20% - 40% of the loan book exposure went on payment holiday as a result of the abrupt stop in economic activity.

Once a loan obligation goes into the payment deferral mode, the following are the likely paths:

Strategic action plans are needed to focus on loan book hotspots, development of forward- looking key risk indicators, timing and sequencing of remedial actions. A great starting point is to examine ‘going-in’ health of the portfolio, including rating grades/scores, collateral and recovery estimates.

We prepared the following checklist that can be used as the basis to develop a strategic action plan:

- Exposure

- Defaults

- Recovery and collection planning

Future strategic plans, and therefore financial projections, must take a view on how the economy will recover, or not, in both the short and the long term to give confidence to all stakeholders. This involves a focus on ‘stay-in-business’ strategies for internal management while managing external disruptive scenarios on many fronts.

BankingBook helps clients assess the health of their loan books, develop recovery plans and ‘stay-in-business’ strategies. BankingBook’s ScenarioFrontier, delivered in an easy-to-use web- based front-end, provides users the flexibility to create customized scenarios, the power to analyze strategic plans, and the oversight to monitor performance.