OREANDA-NEWS. July 20, 2012. Sviaz-Bank and the International Analytics Unlimited Bank Club have held their third annual conference “Problem Loans: Solutions and Prospects.” By a longstanding tradition, the Moscow Chamber of Commerce and Industry and the Project Managing Company were their partners in putting on the event, reported the press-centre of Sviaz-Bank.     

Today, growth in bank portfolios of problem loans is a critical issue that affects the banks’ financial stability. The speakers and experts attending by invitation gave their views on the growth in problem loans, the amendments to the regulations in force from July 1, and restructuring of housing mortgages, with reference to examples of out-of-court debt settlement. Another package of subjects for discussion included debt recovery by collection agencies, the legal aspects of collection agencies’ operation, and insurance against risks of defaults on loans, among other issues.

The conference was attended by Yuri Azarov, General Director of the Moscow Chamber of Commerce and Industry; Pavel Samiyev, deputy General Director of the Expert RA Rating Agency; Mariusz Kloska, General Director of the EOS Collection Company; Guzelia Imaeva, General Director of NAFS; Natalia Petrova, Director of the Financial Analysis and Analytics Department, Project Managing Company; Roman Krasnoruzhenko, Executive Secretary of NAPCA; and Irina Poddubnaya, deputy General Director of Sequoia Credit Consolidation CJSC, among others. Oleg Preksin, Vice President of the Association of Russian Banks; Victor Averyanov, Director of the Outstanding Debt Management Department, AKB Investbank; and Svetlana Yazykova, Director of the Banking System Development Center, Rossiya Association, were the experts at the conference.

An overview of the problem was provided by Pavel Samiyev, deputy General Director, Expert RA Rating Agency, who spoke about the trends in problem assets and changes in the banking industry regulation. In the Agency’s estimates, the Russian banks’ total assets increased by 23% in 2011 (up from 15% in 2010), all segments of the loan market having grown significantly – the aggregate loan portfolio was 28% bigger. This year, Expert RA has registered stabilization of the quality of the loan portfolio, 15% of which are loan past due. Importantly, the share of renewed loans in the banks’ portfolio had declined to 12% on July 1, 2012 (down from 15% on July 1, 2011). Average concentration of loan risks in the banking system is still high, at 27.73% of the net assets as of April 1, 2012. Pavel Samiyev also spoke about regulatory innovations designed to reduce loan risks.

According to the findings of a survey conducted by the EOS collection company, as reported by Mariusz Kloska, the company’s General Director, the effect of risks caused by crisis is at its minimum level in countries of stable economies such as the United Kingdom, Germany, and Belgium, and may be very significant in Russia and Greece. It is equally significant how problem loans are managed in each country. The experience of other countries is particularly important for Russia where debt recovery institutions are in their early phase of development. Mr. Kloska drew the audience’s attention to the need for each organization to have a debt monitoring department and emphasized that the situation over debts past due is expected to grow worse in European countries.

Roman Krasnoruzhenko, executive secretary of the National Association of Professional Collection Agencies (NAPCA), gave a summary of the Russian debt recovery market. In particular, the Association’s agencies have a backlog of almost 300 billion rubles to recover, about 200 billion rubles of which are recoverable by agents and 100 billion rubles are ceded debt. Banks (90%), telecommunications and insurance companies, utilities, and business-to-business groups are the debt collectors’ principal customers. The market grows at an annual rate of 15% and has a high consolidation ratio – the Top 20 collection companies have 70% of the market to themselves.

Mr.Krasnoruzhenko commented on the situation on the debt recovery market and the draft law on outstanding debt recovery. The market emerged, he said, because of a lack of laws expressly regulating debt recovery, operation of dishonest debt collectors on the market, debtors’ grievances, and the ambiguous reputation business has in society.

Dmitry Djagmaidze, deputy director of the development department, HMRA (Housing Mortgage Restructuring Agency) OJSC, spoke about a new program for active debt restructuring for customer banks. The Russian Federation’s government, joined by banks and HMRA, is restructuring debts defaulted on by borrowers in a difficult financial situation. According to Mr.Djagmaidze, the government’s priority now is fulfilling its social obligation to society and developing human potential.

According to HMRA, around 2% of the mortgagees find it hard to pay off the loan regardless of the economic situation in the country. Temporary loss of income is the chief reason why borrowers ask for help. Apart from the crisis, the most frequent reasons behind outstanding debt are divorce, change of job, and childbirth.

Poor knowledge of finance among the public is also a major factor for the borrowers’ problems arising and getting worse. When borrowers take out a mortgage they do not understand the risks involved and do not view mortgage as a long-term obligation. The speaker went on to list effective restructuring instruments, including a grace period the borrower is allowed to become solvent again, a lower payment burden (a different debt repayment period, a different interest rate, or change of residence), and regaining of earning power.

Irina Poddubnaya, deputy General Director of Sequoia Credit Consolidation CJSC, spoke about development trends in the collection business, in particular, development of ethical collection business. In the company executive’s view, collection agencies are to abandon aggressive approaches and act more in the role of financial consultants helping customers to repay their debts.

Guzelia Imaeva, Director of the National Agency for Financial Studies (NAFS), made public the results of a countrywide survey of the consumer market for loan products that showed that almost one in three borrowers is a “potential debtor,” that demand for consumer loans is shifting to the Russian regions, and that Russian citizens plan to borrow more than save next year, and that banks enjoy the “highest degree of confidence” among the financial institutions.

For more detail about the reports, visit the website http://www.mbka.ru/.

The Analytics Unlimited Club holds its events regularly, all evoking interest in the banking community and among market experts – in 2010 and 2011, it held round tables on restructuring and recovery of problem debts.