Managing Problem Loans for Business Bankers

Introduction

The effects of the COVID-19 pandemic are still lingering with new, and yet to be discovered, variants ravaging parts of the world, even in Singapore and beyond. While this is continuing, the Russian-Ukrainian war is adding more uncertainties to the global economy with inflationary hikes in food and fuel prices, which are spilling over to other consumer and non-consumer products. Parts of Africa and Asia are bracing for bad times ahead in 2023. Other things in the daily news headlines in all media include ongoing trade wars, the US dollar crisis, and serious financial problems of global banks such as Credit Suisse, Deutsche Bank, and Wells Fargo US. Big banks like HSBC and Citi are restructuring their assets and operations worldwide to stay ahead. Businesses are under pressure from falling consumer spending, rising costs of operations, and a tighter credit squeeze in some places.

During times of economic growth, bank management focuses on building assets and market share, with less attention to problem loans, because new revenues can more than offset the higher risk. In the times we are observing now, it appears only prudent to review credit risk management strategy as economies slow amidst uncertainties, and taking active steps is urgent to reduce negative consequences. Preparing for bad loans and managing them is not an option. It is a priority, and it should not wait.

 

Organization

Outcome

At the end of this program, participants will be able to:

- Identify and understand the causes of problem loans for future prevention, and reasons for termination of banking relationship
- Apply concepts to evaluate loan rehabilitation risks
- Analyze the prospects for a weak loan rehabilitation & recovery or a termination recommendation
- Evaluate borrower's rehabilitation proposal and risk of credit loss, before making recommendation
- Demonstrate the prospects of business and loan rehabilitation with data and logical review of facts

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No Topic Topic Description
1 The anatomy of a problem business loan account
  • Conditions of a problem business loan
  • Causes leading to a problem condition
  • Lessons learned - avoid problems in the future
2 Managing a problem loan account
  • Overview of the process
  • Terminate vs. rehabilitate decisions and rationale
  • Pre-requisites for loan rehabilitation
  • Making a termination recommendation
3 Rehabilitation of a problem loan account
  • Overview of the problem borrower's environment
  • Financial & loan restructuring - rationale and scope
  • Corporate restructuring and recovery
  • The framework of a scheme of restructuring & rehabilitation

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