3. Remedial management
We consider that remedial management strategies depend on
assets classification. At each
stage, a new strategy must be deployed.
28 MBA in Banking and Finance
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Classification
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Remedial management strategies
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Officer in charge
|
|
Class A
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Maintain and improve relationship.
Friendly remind the borrower (if debt is overdue).
|
Relationship Officer
|
|
Class B
|
Require more collateral to secure the loan
Require a short-term repayment schedule from the
borrower or restructure the loan if the borrower is not likely to repay within
3 months.
|
Relationship Officer
|
|
Class C
|
Require a short-term repayment schedule from the
borrower or restructure the loan if the borrower is not likely to repay within
6 months.
|
Remedial Manager
|
|
Class D
|
Exit the business by selling collateral and/or taking legal
action.
|
Remedial Manager
|
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Class E
|
Exit the business by selling collateral and/or taking legal
action.
|
Remedial Manager
|
The proposed remedial strategy may appear as rigid but two main
reasons founded our choice:
1. Loan recovery is extremely time-consuming especially when
the borrower is unwilling
to repay. It may also draw staff members' attention away
from other tasks and more lucrative businesses.
2. The long follow-up process involving telephone
calls and transportation fees particularly when the borrower is not in
the same geographical area can make the loan recovery be very costly for the
bank. Attorney fees can also burden the bank especially
when it refers to a legal counsel in collecting the money.
29 MBA in Banking and Finance
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