Banks told to adopt bad loan alert system

Renzo Traversini, director of EMEA/AP (Europe, Middle East, Africa and Asia-Pacific) Risk Centre of Excellence, who led the team, suggested that banks and financial institutions here should prepare preventive measures and NPL solutions by setting more stringent policies on lending to personal and business customers. Traversini noted that the risks from bad loans were unfavourable for all banks, their customers, and shareholders. 

These risks affect banks’ business in terms of financial asset value, credit reserves and economic capital/risk-weighted assets. Therefore, banks require systems or mechanisms to alert them on data that could pose threats of becoming NPLs, since these risks will severely affect profitability, income/cost ratio, and capital adequacy. If the values of a bank’s assets keep dwindling, the balance sheet could show a loss.

Normally, banks will measure risk factors with key performance indicators. They adopt data analysis to manage risks. Timely alerts of bad debts enable banks quickly to come up with preventive measures or solutions with precision and accuracy.

“Banks and financial institutions must create systems or processes to manage risks by analysing data and evaluating possible risks,” Traversini said. “However, the huge amount of daily transactions and the time-consuming processes of data analysis to evaluate risks could cause unnecessary losses to businesses due to the fact that the analysed data comes after the risks already take shape and affect the business operations.” 

To address this problem, SAS has developed a risk-management solution that incorporates a data-analysis system. Moreover, SAS has established an “Analytical Centre of Excellence”, which is a department to provide customers with consultation on managing and analysing risks. 

If banks or financial institutions can control the quality of credit and prevent bad debts, the risks will be subsequently reduced. Some of the banks adopting SAS software to solve their risk-management issues include Bank of America and Danske Bank, the largest bank in Denmark.

Taveesak Saengthong, managing director of SAS Software (Thailand) Co, said: “Currently, Thailand is facing a staggering accumulation of household debts. Banks are now stricter on lending and credit policies for businesses and personal [borrowers]. Therefore, banks need to analyse data on risks with more caution.”