Sean O'Farrell’s Post

Some interesting stats released today regarding the Recovery Loan Scheme. Read Sean O'Farrell's post below which covers some interesting findings from the full article.

Day 99/366: Cyprus Banks Data Show Rise in Loan Restructurings Amid New Lending Increase In February 2024, Cyprus's banking sector not only experienced a notable increase in new lending, with total loans reaching €575.5 million, up by approximately 24.4% from the previous month, but also revealed significant trends in the restructuring of existing loans. This pattern underscores the financial pressures faced by borrowers and the consequential strategic focus of banks on managing these pressures through loan restructurings. 1. Home Purchase Loans The data on home purchase loans is particularly telling, with a total lending amount of €144.1 million, of which €79.2 million were new loans. This indicates that a significant portion, approximately 45.1%, of the lending activity in this sector is attributed to refinancing and restructuring existing loans. This high percentage of restructuring activities suggests that a substantial number of borrowers are under financial pressure, prompting banks to allocate considerable resources towards modifying existing loan agreements to accommodate borrowers' changing financial situations. 2. Consumer Loans In the consumer loans segment, February saw a total of €23.2 million in lending, with €21.3 million as net new loans. This leaves a relatively smaller portion for restructuring, indicating lesser financial stress in the consumer lending space compared to mortgages. 3. Corporate Loans Loans to non-financial corporations up to €1 million and those exceeding €1 million show varied restructuring activities. Specifically, in larger corporate loans (over €1 million), a significant amount of €216.3 million (out of a total of €340.7 million) indicates restructuring or refinancing. This highlights the financial strains and the strategic shifts in larger corporations, necessitating a notable focus on loan restructuring. 4. Impact of Interest Rate Changes The shifts in interest rates across different loan types further influence the restructuring landscape. For instance, the decrease in interest rates for house purchases to 5.15% from 5.26% might be facilitating the restructuring trend in mortgages, as lower rates offer a pathway to more sustainable repayment terms for borrowers. Analysis The considerable portion of loan restructuring, especially in the home purchase loans sector, points to a critical aspect of the current financial environment in Cyprus. It reflects not only the financial duress that borrowers are experiencing but also the banking sector's response in terms of reallocating resources towards restructuring efforts. Such measures are indicative of banks' strategies to mitigate financial risks by assisting borrowers in distress, thereby ensuring long-term loan viability and financial stability.

😌Non performing loans - without securing the facility 😌 With the implementation of new banking era there are few most popular product under personal loan category. This product comes with “0” securities and mostly the collateral would be a salary assignments or decreasing term life assurance. This was a most attractive and high income genarated lending product once, however due to the economical situation of the country and the trend of people going abroad this came to most curious and very impairment increasing product to the banking sector. In Sri Lanka, non-repayment of loans is governed by several laws and regulations under the Banking Act and other related legislation. When borrowers default on loans, banks and financial institutions can take certain legal actions to recover their dues. Here’s a general overview of the legal framework and processes for non-repayment of loans: 1. Banking Act of Sri Lanka (No. 30 of 1988) The Banking Act regulates the conduct of licensed commercial banks and specialized banks in Sri Lanka. If a borrower fails to repay a loan, the bank can take measures to recover the outstanding amount under the terms of the loan agreement. 2. Recovery of Loans by Banks (Special Provisions) Act, No. 4 of 1990 This act provides an expedited process for banks to recover loans. It allows banks to recover debts through quicker legal procedures. Under this act, banks can: Apply to court for recovery without having to go through lengthy civil proceedings. Obtain court orders to seize collateral or recover funds directly from the borrower’s assets. 4. Insolvency and Bankruptcy Proceedings If a borrower is unable to repay their loans and is declared insolvent, bankruptcy proceedings can be initiated under the Insolvency Ordinance of Sri Lanka. This can lead to the liquidation of the borrower’s assets to settle the debts. 5. Non-Performing Loans (NPL) and Central Bank Guidelines The Central Bank of Sri Lanka issues guidelines on handling Non-Performing Loans (NPLs). Banks are required to classify loans as NPLs after a certain period of non-payment (typically 90 days), and they are required to maintain provisions for such loans. The bank can: Negotiate with the borrower for restructuring the loan or providing grace periods. Take legal action to recover the loan if negotiations fail. 6. Civil Procedure Code Under the general Civil Procedure Code, a bank can file a civil lawsuit to recover unpaid debts. The court may issue a decree for the repayment of the loan, which can lead to wage garnishment, asset seizure, or attachment of the borrower’s property. Consequences of Non-Repayment: Legal Proceedings: Borrowers may face legal action, including lawsuits, foreclosures, and asset seizures. Credit Blacklisting: Non-repayment can lead to blacklisting by the Credit Information Bureau of Sri Lanka (CRIB), affecting the borrower’s ability to obtain future loans. #npl #non_performing #loans #banking #repayments

The British Business Bank has released more details on the Growth Guarantee Scheme #GGS, the successor to the Recovery Loan Scheme. #GGS is designed to support access to finance for UK smaller businesses as they look to invest and grow. It is expected to support around 11,000 smaller businesses between 1 July 2024 and 31 March 2026 and has so far accredited 41 lenders. Following their accreditation, each lender needs to put in place the operations required to start lending under the scheme. They will be listed on the British Business Bank website once they are ready to start receiving applications. Currently, 20 lenders have confirmed they are open for applications and further lenders are going through the accreditation process and will be accredited over the coming weeks. These lenders will provide a wide range of finance types to smaller businesses, including term loans, overdrafts, asset finance, invoice finance and asset-based lending. #GGS terms include: 👉 Businesses can access up to £2m per business group, with the minimum and maximum amount of the facility varying according to the business’s circumstances and the type of facility. 👉 Maximum facility sizes are up to £2m per business and minimum facility sizes start at £1,000 for asset finance, invoice finance, and asset-based lending and £25,001 for term loans and overdrafts. 👉 The scheme supports a wide range of products, including term loans, overdrafts, asset finance, invoice finance and asset-based lending facilities. However, not all lenders will be able to offer all products. 👉 Term loans and asset finance facilities are available from three months up to six years, with overdrafts, invoice finance, and asset-based lending available from three months up to three years. 👉 Businesses that took out a Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS), Bounce Back Loan Scheme (BBLS) or a Recovery Loan Scheme (RLS) facility before 30 June 2024 are not prevented from accessing #GGS, but borrowing under these schemes may reduce the maximum amount the borrower is eligible for. 👉 Interest rates and fees charged by lenders will vary and will depend on the specific lending proposal and the lender’s pricing will take into account the benefit of the government guarantee. 👉 Personal guarantees can be taken at the lender’s discretion, in line with their normal commercial lending practices and Principal Private Residences cannot be taken as security within the scheme. 👉 The scheme provides the lender with a 70% government-backed guarantee against the outstanding balance of the facility after it has completed its normal recovery process. 👉 The borrower always remains 100% liable for the debt and the #GGS backed facilities are provided at the discretion of the lender and lenders are required to undertake their standard credit and fraud checks for all applicants. Reinald de Monchy British Business Bank Midlands

As rates have risen in the past two years there has been a lot of talk about commercial real estate (CRE) loan maturities in 2024 & 2025 and how bad that could get for commercial banks. The assumption is a repeat of what happened in 2008 will occur due to the historic spike in interest rates. Here is some perspective: 1) In 2008 most of the loans out there had been on the basis of asset value or the "Loan-to-value" (LTV) with little concern for "Loan-to-cost" (LTC) or how much equity the borrower had in the project. Prior to 2008, a typical loan was structured at 80% LTV and very often 100% LTC. Post-2008, equity was a priority so most loans since have been made at 80% LTV and 85 - 80% LTC. This means there is cash equity in many of the loans maturing and borrowers will be motivated to preserve their equity and banks have room for restructure. It also means that historically the debt on a CRE asset today is not what it has been in the past cycles, thus the debt load wasn't at the properties maximum when the loan was closed. 2) In 2008 and prior, the "Debt Service Coverage Ratio" (DSC) wasn't scrutinized like it has been in the past 15-years as the commercial banking industry shifted to focus on lending on cashflow post-2008. This is a huge pivot and meant the focus on making new loans was about the "Net Operating Income" (NOI), or cashflow, and not theoretical values. For the past 15-years, commercial banks have been disciplined with using underwriting expenses to temper NOI, thus creating room for something like interest rate increases. Rent increases are typically not a part of the underwriting, yet another offset to increased interest rate expense. Loans maturing today were underwritten with this mindset for the most part. Not so in 2008. 3) In 2008 and prior, the experience of the borrower/sponsors wasn't a consideration as banks saw little value here. Post-2008 commercial banks learned the value of dealing with experienced commercial real estate developers and it became a part of the lending culture. The mindset of the borrower/developer was different too after surviving 2008 and this made for a stronger lending partnership. So these are three things that distinguish todays commercial bank lending environment from that of 2008 and prior, and, these are significant factors. Certainly not saying that there won't be carnage ahead, but, its incorrect to assume that commercial banks have been behaving for the past 15-years the same way they were prior to 2008. 2008 - 2010 was a brutal time for commercial banking but it's clear that all involved (banks, regulators and borrowers) learned valuable lessons and adjusted their business models accordingly. The fact is CRE loans made post-2008 were underwritten better and most borrowers are motivated to keep their loans current as they have equity at stake. Hopefully this will be the difference maker in upcoming loan maturities and we don't see a repeat of 2008.

#HomeLoanHacks: Trust Lending: Myths Vs Facts! If you have any trust issues, this post is for you! How the Internet Thinks It Works (Myths/Misunderstandings) vs Facts: - Myth: Lenders can’t see loans under a trust on your credit report because the trust acts as a magical blanket that hides it all. - Fact: It DOES show up on your credit report. It includes the loan amount, bank name, reference number, and YOU as a guarantor. L - Myth: Buying a property under a trust makes it a liability for the trust, not you. - Fact: If you bought property and have a loan under a trust with a corporate trustee structure, then SOME lenders will consider it as a company liability, not yours, if you can provide an accountant's letter confirming that the trust is self-sufficient (can pay its own expenses and liabilities). - Myth: Refinancing or moving existing loans under a trust frees up your borrowing capacity. - Fact: You are basically transferring the property to a different entity; hence you have to pay stamp duty on the price you are transferring it, which may mean you are paying tens of thousands of dollars for this. So do the cost/benefit analysis if you have to go down this route. - Myth: Borrowing power increases under a trust. - Fact: Under the trust structure, your borrowing capacity is less compared to your personal name. You can't claim negative gearing under the trust, so that reduces your borrowing capacity as is. - Myth: You pay higher interest rates for lending under trusts.* - Fact: No! Not if you know which lenders to go to. Most lenders have the same rates for borrowing under your personal name or under a trust. Only 2-3 lenders charge a premium of 0.05% - 0.10%, so you can easily avoid those lenders. What You Need to Consider When Borrowing Under Trusts: - Have a knowledgeable accountant and a broker who knows what he is doing. - A broker who can strategize which lenders to go to and in which order. Broker is your sole guide on this journey since he knows which lenders has these policies and out of them which are suitable for you. - Whether you need to set up a new trust for every purchase? The answer may or may not be yes depending on your remaining borrowing capacity. So you'll need to consider setup costs. -Not every bank can provide an offset facility under the trust structure. If that is important for you, discuss it with your broker so they can suggest lenders accordingly. - Lenders' policies and appetite can change. Be mindful that these favorable policies may not last for very long. Recently, one of the major players stopped going into LMI territory (over 80% LVR) for loans under trusts. Use these favorable policies while you can.

As a retail banker, my role is inherently challenging, especially when it comes to directly interfacing with customers. Every day, I’m reminded that just as every face in our world is unique, so too are the desires, needs, and financial situations of each individual who walks through my door. This variety can make my job rewarding, but it also brings a steep learning curve and, at times, harsh realities. Recently, I encountered a particularly striking example of this during a loan application process. A lady approached me seeking a business loan, and I felt a sense of hope as we began to navigate the necessary steps together. Her Corporate Affairs Commission (CAC) documents were intact, and we successfully opened a corporate account, marking a promising start. As a standard procedure, I requested that she provide account statements from another bank to support her loan request. She expressed a sense of urgency, as she was expecting a massive shipment of goods and needed financial support to fulfill this order. However, the optimism surrounding her application quickly faded when a credit search revealed a significant issue: she was labeled as having bad debt. This revelation led to the collapse of her loan approval. It turned out that she had previously borrowed money from an online loan app and had defaulted on the repayment. This experience could serve as a cautionary tale for others in similar situations. Borrowing money can be a useful tool for personal and business growth, but it comes with responsibilities. Failing to honor repayment agreements can have serious consequences that extend beyond just losing access to funds; it can damage one’s credit worthiness and future financial opportunities. In this particular case, her desire for financial assistance became unachievable due to past neglect. The potential loss of her business is a painful reminder that our actions have consequences, and it’s vital to approach borrowing with caution and seriousness. As we navigate through life, we must remember that every decision we make—especially financial ones—can reverberate through our lives in ways we might not anticipate. For example, in Nigeria, our Bank Verification Number (BVN) serves as a unique identifier that links our financial transactions, making it impossible to escape the consequences of poor financial decisions. While I continue to hold onto hope for brighter days ahead, I strive to share these lessons with my clients and encourage them to be responsible borrowers. The journey toward financial stability and success is paved with conscious decisions and prudent actions. In the end, borrowing is not inherently bad; it can be a lifeline for those who wield it wisely. Ojo Evans Ceo De Parrot media

New Loan Rules: As of October 1, there will be changes to the loan acceptance guidelines https://ift.tt/7pXxcr2 New Loan Rules: As of October 1, there will be changes to the loan acceptance guidelines RBI New Loan Rules: Effective October 1, only specific loan kinds will be subject to the new regulations; if you take out a loan after that date, you will be subject to them. RBI's latest loan guidelines: The RBI will be changing its regulations if you intend to apply for a loan in the near future. After October 1st, only specific kinds of loans will be subject to the new regulations; otherwise, you will be eligible for a loan under the new terms. The Reserve Bank has provided information on this. As of October 1, the Reserve Bank of India (RBI) announced changes to the regulations governing retail and MSME lending to banks and NBFCs. RBI has said that starting in October, the borrower would be required to provide full information (KFS) on the terms of the loan, including fees for interest and other charges. Currently, it is required to provide all relevant information on loan agreements provided by commercial banks, particularly to individual borrowers, small-amount loans, and digital loans from units governed by the RBI. RBI released a statement. The RBI said that it has decided to standardize the KFS lending guidelines. The central bank has said that it made this decision in order to provide clients full disclosure about loans and to promote openness with respect to the offerings of all financial institutions that fall under its jurisdiction. This will enable the borrower to make deliberate financial choices. Adopt new regulations as quickly as you can This directive would be applicable to term loans granted by all entities (RE) under RBI regulation for retail and MSME purposes. KFS is a straightforward summary of the key details of the loan arrangement. This will provide the loan recipients accurate information. Financial institutions will take the required steps to put the rules into effect as quickly as feasible, according to the central bank. The rules will change on October 1. All new retail and MSME term loans approved on or after October 1, 2024, must comply with the requirements. This also applies to new loans made to current clients. According to the RBI, the Annual Percentage Rate (APR) would also include payments like as insurance and legal fees that are paid by institutions that take loans from institutions within the central bank's jurisdiction on a real basis on behalf of outside service providers. No money will be collected without the borrower's permission. This need to be revealed individually. In the event that the RE is engaged in the recovery of these costs, the borrowers will get receipts and all relevant documentation for each payment in a timely manner. Furthermore, without the borrower's explicit approval, no charges beyond those listed in the KFS may be made at any point throughout the loan's term...

Why Payday Loans Are Not the Villain: A Rebuttal to Popular Criticism. Response to the 2024 Case Study on Payday Loans: [Link Below]  By: Jer Ayles Dear Esteemed Academic Colleague, Thank you for sharing your insights through the recent “Predatory Lending in the Payday Loan Industry” case study, focusing on XYZ Loans. Your dedication to examining the complexities of financial practices & their impact on vulnerable populations is acknowledged and respected. However, addressing certain misconceptions & offering a broader perspective on the role of subprime lending in today’s economy is imperative. Firstly, it is essential to recognize that the clientele of subprime lenders often find themselves in precarious financial situations where traditional banking services are either unavailable or unsuitable for their immediate needs. For many, the option to secure a small-dollar loan swiftly can be the difference between a minor financial hiccup & a significant economic disaster. These services are not merely transactions but lifelines for those on the financial fringe. Secondly, the portrayal of subprime lenders as entities that uniformly engage in deceptive practices and trap consumers in cycles of debt overlooks significant efforts within the industry to promote transparency, fairness, and responsibility. Many lenders are committed to clear communication about terms and conditions, including using prominent displays and straightforward language to ensure that borrowers are fully informed about the implications of their decisions. Notably, the narrative does not account for the satisfaction of countless consumers who use these services responsibly and to their advantage. A more balanced view would include testimonials from those who have utilized payday loans as a temporary solution, enabling them to overcome financial emergencies without long-term repercussions. These stories underscore the importance of providing financial options to underserved communities, empowering them to navigate challenging times. Moreover, the case study implies a blanket characterization of the industry without acknowledging the diversity of practices and the existence of lenders who prioritize ethical conduct and customer welfare. In addressing the concerns raised by regulatory investigations, it is crucial to differentiate between companies that engage in predatory practices and those that strive to operate within legal and ethical boundaries. The actions of a few should not tarnish the reputation of the many dedicated to responsible lending. Regulatory compliance & consumer protection are paramount for many in the industry, with ongoing efforts to enhance product offerings, financial literacy, and support systems for borrowers. In addressing the concerns raised by regulatory investigations, it is crucial to differentiate between companies that engage in predatory practices and those that strive to operate within legal... https://lnkd.in/gus5qDsB

CREDIT APPLICATION PROCESS BY BANKS OR FIS Credit application process is an important task in Banking or Financial Institutions for a right credit decision. In many cases credit decision is taken in the competitive scenario without examining all aspects required mandatory for sanctioning credit resulting in non-performing assets of the concerned organization leading to bad impact on profit and loss account as well as balance sheet. Step by step checklist for verification of loan documents: - FOR BUSINESS LOAN 1.      Loan application in prescribed format with complete details, 2.      KYC documents and business address. Verify KYC documents with the original and copies should be self-attested.  In case any doubt the documents should be verified from issuing authority’s official web site. 3.      In case of rental business address, rental agreement, tax receipt etc. to be verified, 4.      In case of company (Partnership or private limited company) partnership deed, company incorporation documents like MOA, AOA, Certificates etc. should be verified to ensure legitimate business operation, 5.      Company’s bank statement for last one year and Income Tax Returns for the last three financial years to be verified. 6.      In case of loan up to 10 lacs, unaudited Balance Sheets for last three years and loan above 10 lacs, audited Balance Sheets need to be submitted along with Income Tax Receipts to be scrutinized in depth to understand business model and growth potential, capability of income generation and repayment of loans. 7.      Project reports and future plans of the company to assess the maximum eligibility of loan amount 8.      In case of enjoying loans from other banks, bank statement, closure report of loan account etc. to assess the comprehensive risk assessment, 9.      Credit score from CIBIL reports to be obtained and the undertaking the No Dues certificate in any bank from the borrower to avoid multiple finance, 10.  The bank should verify the residential and business address of the applicant by engaging outside agencies and keep records of their certificate, 11.  Market report on the credibility of the borrower to be obtained, 12.  Trade License, Pollution Certificate, Project Clearance Certificate from the appropriate authority, if necessary, to be obtained, 13.  The bank should examine in depth the Balance Sheets, Financial Ratio analysis. Chartered Accountant’s Certificate justifying the eligibility of loan quantum. 14.  Collateral documents like Mortgage of immovable properties, Moveable collaterals like LIC policies, NSCs/KVPs, Shares, Fixed Deposits, Mutual Fund certificates etc. need to be obtained from the borrower and original deed along with deed related documents, search reports for 20 years, valuation of property to be derived by the bank’s authorized lawyers or valuers. 15.  Opinion Reports of the borrowers as well as guarantors to be compiled along with Assets and Liabilities Statements.