Building and Optimising the Non-Performing Loan Sale Process

Context

When a non-performing loan is sold to an asset management company, the bank's work is not over. Collections arriving from that customer after the sale must be routed to the right party, closure data from the asset management company must be processed, and — most importantly — Central Bank and credit bureau reporting must be aligned with the sale. Where those steps are incomplete, two consequences follow: financial reconciliation breaks, and the customer's credit record stops reflecting reality.

Approach

• Customers subject to a sale could be flagged in the system, making sale status a customer attribute.
• A flow was built to transfer post-sale collections to the asset management company.
• Closure data received from the asset management company could be processed into the system.
• Central Bank and credit bureau reporting was restructured in line with the sale.
• All of a customer's products could be included in the sale, and the sold portfolio became reportable.

Outcome

• Post-sale collection flow moved from individual follow-up to a defined process.
• Consistency between regulatory reporting and sale status was achieved.
• The sold portfolio became reportable, improving management visibility.
• The customer's credit record was brought into line with the actual position.

This case study describes the project through its scope and approach. Client name, commercial figures and performance metrics are withheld under confidentiality obligations.

What This Project Left Behind

Selling a non-performing loan removes the risk from the balance sheet, but it does not end the process. Where post-sale reporting and reconciliation steps are left incomplete, risk removed from the balance sheet returns as operational risk. The same is said to the borrower in distressed-loan advisory: a receivable changing hands does not extinguish the obligation — only the counterparty has changed.

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