# Pandemic loans: Three ways to secure recovery
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-07-07
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: How Banks Can Ensure Repayment Amid Pandemic Recovery
Meta Description: Discover how UK banks are tackling the issue of loan repayment in the wake of the pandemic, including training, communication, and risk mitigation strategies.
URL: https://financedigest.com/pandemic-loans-three-ways-to-secure-recoveryhtml

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_Through the worst of the pandemic, the government set up interest-free emergency support packages to help struggling businesses. With the economy slowly recovering, **Mike Hampson**, CEO at_ [Bishopsgate Financial](https://www.bishopsgate-financial.com/) _explores the range of options available for banks to ensure repayment._

Banks have handed out more than [£75 billion to 1.6 million](https://www.thisismoney.co.uk/money/smallbusiness/article-9457301/Banks-poised-call-billions-Covid-loans.html) [\[1\]](#_ftn1) firms under several emergency support schemes. But the harsh reality is that not all loans will be repaid as UK banks warn [up to 50% of coronavirus loan borrowers](https://www.ft.com/content/8a551c37-2de8-446b-a8b8-d4a61d33ef73) [\[2\]](#_ftn2) will default on payment.

Economic [recovery relies on banks continuing](https://www.financedigest.com/hotel-group-accor-continues-post-covid-recovery-after-a-gorgeous-summer.html "Hotel group Accor continues post-COVID recovery after a ‘gorgeous’ summer") to do the right thing, to remain financially viable. But, with the debt recovery burden falling on the banks that issued the loans, the financial community is concerned they will be blamed by [businesses unable to afford loan](https://www.financedigest.com/types-of-business-loans.html "Types of business loans") repayment.

The process will depend heavily on [banks deploying the appropriate client relationship management](https://www.financedigest.com/asset-managers-on-alert-after-whatsapp-crackdown-on-banks.html "Asset managers on alert after ‘WhatsApp’ crackdown on banks") skills and experience. Debt recovery is a specialist area and can be challenging at a time when skilled payment collection experts are in short supply, warns [Bishopsgate Financial’s Change Perspective 2021 report](https://www.bishopsgate-financial.com/insights/the-change-perspective/the-change-perspective-2021-resilience-digital-climate-and-collaboration) [\[3\]](#_ftn3).

**Managing from the inside with [client support](https://www.financedigest.com/bny-mellon-strengthens-support-for-treasury-services-clients-in-germany-with-appointment-of-gungor-taner.html "BNY MELLON STRENGTHENS SUPPORT FOR TREASURY SERVICES CLIENTS IN GERMANY WITH APPOINTMENT OF GÜNGÖR TANER") training**

The financial community estimates up to [60% of new coronavirus scheme loans](https://www.theguardian.com/business/nils-pratley-on-finance/2020/oct/07/questions-treasury-covid-loan-scheme-bites-back) [\[4\]](#_ftn4) will default or suffer repayment issues that will drive previously unseen levels of non-performing loans. It’s a tough [balancing act](https://www.financedigest.com/fintech-and-compliance-managing-the-eternal-balancing-act.html "Fintech and compliance: Managing the eternal balancing act"), which needs careful management of the lending transaction lifecycle, from origination through to collection, recovery, and handling bad debts.

[Banks no doubt already have frameworks in place to manage](https://www.financedigest.com/exclusive-allianz-in-talks-with-banks-for-china-asset-management-venture-sources.html "Exclusive-Allianz in talks with banks for China asset management venture -sources") these elements, but it’s also important to make client interactions easy to ensure their genuine concern for their customers is clear.

Consequently, hundreds of workers at major banks including [HSBC, NatWest, and Metro Bank](https://www.telegraph.co.uk/business/2021/04/19/bank-staff-get-sensitivity-training-calling-covid-debts/) [\[5\]](#_ftn5) are receiving training in how to deal with vulnerable customers and “demonstrate empathy” as the first wave of repayments for coronavirus loans fall due. Staff ‘sensitivity’ training builds on client-support and workout capabilities, such as being susceptible to early-warning systems, developing short-term forbearance solutions, loan modifications, and providing guidance on alternative products.

**Mitigating the risks with constant customer communication**

In the face of so much uncertainty, preparation is key. Financial institutions should make it easy for customers to [communicate regularly via](https://www.financedigest.com/teach-first-reaps-the-benefits-of-joined-up-communications-with-via-voice.html "Teach first reaps the benefits of joined-up communications with via voice ") any channel.

Greater and timelier direct communication is to be encouraged. [Bank managers should create opportunities for human interactions for distraught customers](https://www.financedigest.com/christmas-debt-hangovers-how-banks-can-help-customers.html "CHRISTMAS DEBT HANGOVERS: HOW BANKS CAN HELP CUSTOMERS") who just want to talk through their concerns and establish helplines for those who need support during remote (mobile or internet) transactions. HSBC, now has [400 staff in its debt collection team](https://www.thisismoney.co.uk/money/smallbusiness/article-9457301/Banks-poised-call-billions-Covid-loans.html) [\[6\]](#_ftn6) to discuss payment holidays, interest-only repayment periods, and extending loan terms. The [aim is to ensure staff had a “consistent understanding](https://www.financedigest.com/activision-aims-to-help-uk-regulator-better-understand-our-industry.html "Activision aims to help UK regulator ‘better understand our industry’") of vulnerability” and are “aware of the factors that could make an individual vulnerable” when having repayment conversations with customers.

An [executive at another bank said its expanded debt collection team](https://www.financedigest.com/adnami-strengthens-executive-team-with-jorgen-gosvig-appointed-as-cfo.html "Adnami strengthens executive team with Jørgen Gosvig appointed as CFO") was being trained in “empathy, vulnerability and listening skills”. The individual told _The Telegraph_: “Ultimately, we don’t want to damage the economy by being overly aggressive.”

My view is that [banks should embed more dialogue and start reaching out to clients proactively to discuss their loan](https://www.financedigest.com/georgias-tbc-bank-slashes-loan-decision-time-with-fico-solution.html "Georgia’s TBC Bank Slashes Loan Decision Time with FICO Solution") repayment options or simply to be reassured. This will in turn [support fair](https://www.financedigest.com/supporting-a-fair-and-resilient-society-by-protecting-access-to-cash.html "Supporting a fair and resilient society by protecting access to cash ") treatment of customers and promote good customer outcomes.

**[Data mining for early detection of financially](https://www.financedigest.com/how-data-governance-as-a-service-can-transform-the-financial-sector.html "How Data Governance-as-a-Service can transform the financial sector") distressed customers**

With the substantial amount of data intelligence at their disposal, [banks can better assist distressed customers by developing a robust early warning](https://www.financedigest.com/world-bank-warns-global-economy-could-easily-tip-into-recession-in-2023.html "World Bank warns global economy could easily tip into recession in 2023") system. This would consist of quickly identifying and personalising the right repayment hierarchies for [customers that require immediate](https://www.financedigest.com/the-fca-is-taking-immediate-action-on-customer-vulnerability-but-how-does-this-impact-advisers.html "The FCA is taking immediate action on customer vulnerability; but how does this impact advisers?") attention and remediation, in order to prevent their borrowings from converting into Non-Performing Loans (NPL)

Re-training existing teams also allows for greater scrutiny over the applications to reduce the potential for future non-payment of loans. This approach will not only build a more satisfactory, [personalised client experience](https://www.financedigest.com/psd2-and-personalising-customer-experience.html "PSD2 and Personalising Customer Experience") but could also boost the likelihood of Covid-loan returns.

The [banks that address their NPL situation first will have the best chance of getting out of the crisis](https://www.financedigest.com/risk-of-uk-balance-of-payments-crisis-under-truss-is-rising-deutsche-bank-warns.html "Risk of UK balance of payments crisis under Truss is rising, Deutsche Bank warns"), recovering more quickly than the competition, and having better access to the capital they might need.

[\[1\]](#_ftnref1) https://www.thisismoney.co.uk/money/smallbusiness/article-9457301/Banks-poised-call-billions-Covid-loans.html

[\[2\]](#_ftnref2) [https://www.ft.com/content/8a551c37-2de8-446b-a8b8-d4a61d33ef73](about:blank)

[\[3\]](#_ftnref3) https://www.bishopsgate-financial.com/insights/the-change-perspective/the-change-perspective-2021-resilience-digital-climate-and-collaboration

[\[4\]](#_ftnref4) https://www.theguardian.com/business/nils-pratley-on-finance/2020/oct/07/questions-treasury-covid-loan-scheme-bites-back

[\[5\]](#_ftnref5) https://www.telegraph.co.uk/business/2021/04/19/bank-staff-get-sensitivity-training-calling-covid-debts/

[\[6\]](#_ftnref6) [https://www.thisismoney.co.uk/money/smallbusiness/article-9457301/Banks-poised-call-billions-Covid-loans.html](about:blank)


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