CFO Focus: Getting your credit union in shape for loan workouts

Tips for preparing to handle an increased volume of problem loans while ensuring prudent credit risk management.

Now’s the time to prepare for managing increased loan workouts and loan modifications.

Loan performance since the pandemic has remained strong across many U.S. financial institutions in recent quarters, but credit unions and banks are boosting provisions for credit losses in anticipation of tougher times ahead.

In addition, prudential regulators have repeatedly encouraged financial institutions to include loan modifications in their actions to mitigate adverse effects on borrowers resulting from extreme weather, COVID-19, rising interest rates and inflation. They’ve highlighted specific concerns about credit risk management practices, particularly for commercial real estate.

Here are several tips for banks and credit unions looking to get ready to handle potential loan modifications or even loan workouts so they can maintain strong credit risk management.

 

continue reading »