Control Room of the Future
Non-Performing Exposures Strategy Development
European regulators are actively addressing non-performing loans. in their regulatory publications, Sia Partners has developed a solid approach to constructing and implementing a compliant non-performing exposures (NPE) strategy to decrease NPEs and improve risk management.
Managing NPEs
Dealing with non-performing exposures (NPEs) can be a challenging and complex task, but our strategy can help you manage them effectively and minimize the impact they have on a bank’s financial health.
Assessing the current NPE situation and defining objectives
The current state assessment is a vital tool for understanding the bank’s position and building a strategy. We have the capabilities to assess a bank’s control environment, policies and procedures, data quality, IT and automation capabilities, and governance structures to understand the current NPE landscape and define goals around what needs to be done to decrease them and comply with changing ECB requirements.
How Sia Partners can help
- Thorough review of the banks’ current operating environment including but not limited to: understanding the control environment, policies and procedures, data quality, IT, governance.
- Understanding of best practices surrounding NPE management.
- Deep experience in understanding best in class risk management policies.
Our Work
Sia Partners helped implement up-to-date processes and procedures for the Application of the Definition of Default & Non-Performing Loans, based on guidelines set by the Internal Monitoring & Reporting ECB/EBA regulatory bodies.
Sia Partners' approach
- Defined the required data elements to adhere to the DoD and NPL regulatory guidelines.
- Managed the gaps with internal business owners, including the Audit and Joint Supervisory Team.
- Coordinated and established the implementation of required reporting practices in order to comply with the ECB/EBA guidelines.
- Managed and drove the implementation of the required reporting standards within the Credit Risk Data & Reporting area in the roles of Product Owner, Lead Business Analyst, Lead Data Quality & Handling.
Crafting a tailored NPE Strategy to Mitigate current NPEs & Prevent Future NPEs
We help our clients identify gaps and future needs and create a tailored NPE strategy by optimizing risk management practices to reduce and prevent NPEs in the future.
How Sia Partners can help
We aim to prevent NPEs through three pillars:
Process
- Developing comprehensive NPE management policies
- Increased client profiling
- Adapting loan origination, underwriting, collection & recovery processes
- Designing & implementing early warning systems
IT
- Adapting lending criteria and credit scoring
- Utilizing machine learning to build predictive models
- Developing decision trees
- Supporting the borrower & front office relationship
People
- Optimizing the operating model & governance
- Define monitoring criteria
- Self-carisation
- Providing negotiation tips
In order to reduce NPEs, Sia Partners suggests several management options to deal with the existing NPE portfolio including:
- Developing a hold / forbearance strategy
- Outsourcing of servicing
- Active portfolio reductions
- Change of exposure types
- Exploring legal options
Each of these options will be studied & balanced based on certain specificities.
Implementing an NPE Strategy
We help our clients implement and embed their NPE strategies and ensure that management bodies can regularly monitor their progress towards their goals. Creating a culture of continuous improvement and reviewing the NPE strategy and operational plan are key in ensuring that the strategy is successful.
How Sia Partners can help
Sia Partners has extensive expertise in developing, executing and managing strategy in the financial services space with expertise knowledge.
Banks must focus on 4 key areas for a successful implementation of their NPE strategy:
- Roles & responsibilities
- Governance & structure
- Risk Management
- Change Management
Our work
Sia Partners helped implement the credit requirements taken from the ECB/EBA regulatory guidelines on Application of the Definition of Default / Non-performing loans.
Sia Partners' approach
- Drove the implementation of the requirements to esablish the operating model.
- Ensured regulatory compliance of the credit servicing processes across the organization and its business partners.
- Ensured regulatory compliance of the existing data architecture, including establishing an interface with a European multinational banking and financial services company’s IT landscape concerning Vista Hypotheken data.
- Developed an effective monitoring and reporting process across the organization.
