NPLs: good intentions

It is quite simple to submit a survey of the problems, conversely, it is difficult to find appropriate solutions and implement them.

Generally, a problem arises whenever a phenomenon features two or more opposing forces. As for non-performing loans, in most cases there is the necessity to achieve results in line with the trends of the current market (a global, quick and ever-changing reality) in contrast with the poor resources available for the recovery activity, especially from an economic point of view.

Being these companies and credit institutes highly capitalised, it is clear that these resources actually exist but are mostly neglected. Various parameters like human resources (which may also include sociological aspects) and strategic approaches come into play; however the originators regard it as non-core activities.

Then, it goes without saying that when resources are very poor, therefore those who want to acquire a leading position must sharpen their wits. Maybe this is precisely the most important lesson that we have learnt during the economic recession.

To this end, some smart solutions applicable to the presented issues are described below, but we have not come up with all of them ourselves:

1) The replacement of the “impairment” function (in the strictest meaning of the word) with a hybrid solution which combines the drive-by activities relating to loan quality such as the loan controls and sample checks of the mortgaged assets (marketing and cross-selling activities facilitated by a better knowledge of the situations), the sale of insurance products and the easing of new loans to creditworthy subjects also with the purpose of improving and enhancing the efficiency of the goods object of the guarantee;

2) The promotion of clear and ultimate reforms of the legislation on bankruptcy, with well-defined times and costs for the promoters and the streamlining of the extrajudicial approaches;

3) The normalisation of the industrial partnerships between the originators and the managers willing to invest in the conversion of properties/large areas intended for outdated purposes and not adequately enhanced;

4) The consideration of NPL management as an actual discipline which requires a specific training and specialisation for the auxiliary staff, who must take into account both the protection of the debtor and the peculiarities of the creditor;

The readers may think that it is easier said than done. Well, it is worth stressing that this is a theoretical analysis, albeit based on practical cases and direct evidences. Our main intention is to aim at a constant improvement and the accomplishment of the defined targets.

Emanuele Grassi