A leading bank was suffering unusually high levels of retail loan delinquency, which spiked above 20% during an economic downturn. Lending staff were rewarded on the basis of loan volume rather than quality while most loan underwriting and all collections were done solely at the branch with minimal audit.
In-depth analysis revealed that many borrowers had undisclosed debts, debt service ratios of more than 70%, and impaired collateral. The team established a centralized loan remediation centre, optimized processes, procedures, and monitoring, and trained staff on loan policy, underwriting and customer interview skills. This established a more orderly approach to triage as well as an appropriate remediation approach to each account. The result was significantly improved rates of customer retention, profitability, and default vs the competition, as well as reduced liquidity risk.