Portfolio Management During the Pandemic
The global pandemic could cause a wave of defaults, with borrowers, banking customers, and lending institutions being pushed to the limit. What’s important to realize is that: a) This situation is not going to go away in the near to mid-term, and b) It is important to retool commercial lending teams to handle this crisis and problem loans effectively. Until a vaccine for COVID-19 is developed and months pass to manufacture enough to cover a critical mass of the population, we are likely looking at one to two years to eliminate the outbreaks and one to two-year economic recovery after that. What worked before, including during prior crises, is not likely to work in this environment. We need to retire our old playbooks for a while and adapt to this unique situation quickly. The wave of deferrals and the PPP funding only postponed and masked our true assessment of the economic damages to our borrowers, our credit facilities, and our organizations. One of the first steps in adapting to the new environment is changing our underwriting / portfolio management process, as it will face a mass wave of troubled credits. How do you manage them efficiently and effectively, maximizing recovery of viable borrowers and minimizing loan losses?
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