Over the past decade, the European non-performing loans (NPLs) industry has matured, with loan sales and securitisations becoming the modus operandi for banks, and several investors actively entering into NPL transactions. But just as the NPL market achieved a steady, effective pace, the Covid-19 pandemic brought a very rapid and deep fall in economic activity.
With the level of uncertainty high, it is difficult to produce projections. However, this sudden halt is highly likely to cause a re-emergence of the NPL problem. According to recent research of the European Central Bank, during crises NPLs typically follow an inverse-U pattern. They start at modest levels, rise rapidly around the start of the crisis, and peak some years afterwards, before stabilising and declining.
Preparing a plan now to identify and deal with vulnerable loans is imperative, and it starts with developing a proactive debt management mechanism tailored to the creditor’s asset classes and customer circumstances. This mechanism requires accurate and timely loan and customer data, which often entails changes to legacy IT systems.
Watch the video and learn how to respond to the surge of Non-preforming Loans.
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