[Checklist] Managing non-performing loans: do your systems meet ECB requirements?

Banks across Europe need to meet the standards set by the European Central Bank around non-performing loans. Lenders should consider whether their current approach is adequate.

Financial upheaval in the past decade has provoked much soul searching on the risks of lending to businesses and consumers alike. Desperate to avoid a repeat of the sub-prime crisis, regulators have changed the game when it comes to lender treatment of defaulted debt.

A year ago, the European Central Bank (ECB) published its final guidance to banks on non-performing loans (NPLs), aiming to provide a consistent supervisory approach around the way banks identify, measure, manage and write off these debts.

The ECB is clear that reducing the volume of NPLs is beneficial to the economy, freeing up banks to lend more. While the guidelines set out best practice that the ECB expects creditors to follow, the practicalities of doing so are left to the lenders to handle.

Choosing an ECB-compliant system means a lender can be confident that the requirements are being handled, cutting risk as well as saving time and money that would be needed for additional checks and balances.

Regulatory requirements include:

• Appropriate organisational structure and internal controls
  
• Strategies to reduce NPL portfolios
  
• Suitable management information (MI) systems
  
• High quality data
  
• Portfolio segmentation
  
• Adequate technical infrastructure
  
• Dedicated workout units that support the NPL’s full lifecycle
  
• Well-defined forbearance policies, aligned with affordability
  
• Monitoring of NPLs and reporting of performance against strategy
  
• Robust and secure data storage
  
  

QUALCO Collections & Recoveries (QCR) is the ideal solution for managing NPLs in a way that is fully compliant with the European Central Bank’s standards.

QCR is an end-to-end debt collection and recoveries management application, supporting a wide range of financial activities and products at all stages of the collections cycle. This includes pre-collection, early arrears, late collection, third party assignments, legal action, forbearance, write-offs and collateral/ real properties management. QCR tackles the ECB’s requirements on non-performing loans, giving lenders confidence that they are stepping up to regulatory demands. This means they are free to concentrate on their core business and increase lending. Our technology matches a comprehensive list of ECB requirements, including all the areas detailed in the above checklist and more.