OREANDA-NEWS. September 22, 2014. The Conference was arranged by Sviaz-Bank (Vnesheconombank Group), International Analytics Unlimited Bank Club, and the Russian Auction House OJSC.

The event was attended by delegates of banks, including members of the Vnesheconombank (VEB) Group, collection agencies, appraisal companies, IT companies, National Association of Professional Collection Agencies (NAPCA), the Association of Russian Banks (ARB), lawyers, and higher school instructors. Sergey Akinin, Director, Sviaz-Bank’s Problem Assets Management Department, acted as Conference moderator.

As discussion of the Conference’s subject went ahead, many participants spoke about changes caused by the slowdown of lending growth rates and increase in the amount of past-due loans that, in the words of Anatoly Milyukov, ARB Executive Vice President, “has again become the biggest influence on banking business.” Stanislav Volkov, Bank Ratings Director, Expert Rating Agency (RAEX), reported that arrears on loan payments by small and medium enterprises was 7.1% on January 1, 2014 and 7.8% on July 1, 2014, and are predicted to climb to 8.0% by early 2015 compared to the loan arrears in 2012.

The share of past-due loans to individuals is growing the fastest, to 5.3% on July 1, 2014. Mariusz Kloska, General Director, EOS LLC, said: “In the third quarter of 2014, we are witnessing a record 200% supply of arrears on retail bank loans.” Vladimir Shikin, Marketing Deputy Director, National Bureau of Credit Histories (NBCH), reported that 6.5 million loans out of the total 57 million, or 11% of the aggregate portfolio, were past due by the start of the third quarter of 2014.

According to NBCH reports, said Maxim Sablin, Deputy Director, Sviaz-Bank’s Problem Assets Management Department, 1.2 million debtors in arrears did not make a single payment in 2014, up from 700,000 delinquent borrowers in 2013, a sign of an uptrend in the number of dishonest borrowers who take out a loan without an intention to repay it. “What is more, such debtors do not even try to ‘escape into the shadows,’ and instead take an aggressive stand, writing requests for restructuring, probably in an attempt to build a reputation of ‘honest’ borrowers, recalling personal statistics, asking for contract termination, ‘threatening’ to file complaints with all sorts of authorities. Nothing, though, helps them to disclaim their liabilities.” “Professional debtors are daring, walking the edge of the cliff, and ready to play any trick,” Oleg Korchagin, Director, BelVEB Bank’s Pledge and Problem Assets Department, concurred. He gave the rationale for centralization of debt management and spoke about this approach how it works at his bank. Another option is to ask for help from debt collection companies dealing effectively with debtors.

Elena Dokuchayeva, member of NAPCA Council, President and Chair of the Board of Directors, Sequoia Credit Consolidation CJSC, announced the results of a survey conducted by her company: “On average, banks have 30% to 35% of their past-due debts referred for recovery to collecting agencies.” Sergey Shpeter, member of NAPCA, Senior Vice President of the National Collection Service, spoke about the strategy for problem debt management, adding that the portfolio is likely to lose 50% of its real value because of deteriorating quality following restructuring.

By tradition, the Conference participants discussed pledges as security as well. Oleg Vizgalin, acting CEO, Pledge Management Office, Vnesheconombank’s Loan Monitoring Department, cited concrete cases to illustrate primary analysis and identification of an asset provided as security, and the problems arising because of, for example, differences between the provisions of regulations and those of the National Real Estate Cadastre and the Uniform National Register of Titles to Real Property.

Alexander Berezin, head of Sviaz-Bank’s Pledge Service, spoke about cooperation between banks and appraisal companies: “In 2009, the banks declined to accept 36% of the appraisers’ reports, but the number of rejections fell significantly after the banks terminated agreements with dishonest partners and has held steady at between 6% and 8% in the period between 2010 and 2014.” The speaker drew the audience’s attention to the need for banks to know the exact price of the pledged assets, their wear and operating costs, and the possibility of being sold quickly. “You cannot take a formalistic approach to the appraisal of a pledged asset. Appraisal is central to asset pledging,” said Olga Zheludkova, head of the Pledged Assets Management Department, Russian Auction House OJSC. She spoke about conveyance at auctions as a problem assets management tool: “The pledge creditor receives 80% of the amount raised from the sale of a pledged asset.”

Vladimir Lugovoy, head of the office in charge of debt repayment by corporate customers of Sviaz-Bank’s branches, the Bank’s Problem Assets Management Department, spoke about the principle guiding organization of a problem debt management system in the corporate sector. Preventive identification and analysis of signs of a problem developing over an asset are the principal elements of this system. Vadim Mkhitarian, head of the judicial noncore assets recovery and management office, HMLA Master Service division of HMLA OJSC, said that automation of proceedings and choice of a suitable IT system are of major importance for optimizing pledged mortgage recovery.

Pavel Rusakov, head of the group for cooperation with outside partners, Pledged Property Management Office, VTB 24 Bank’s Risk Analysis Department, focused on the following symptoms of the lending market: tougher requirements to borrowers, more serious competition, and a greater role of the Central Bank as lender and interest rate regulator. Alexei Kostovarov, senior lawyer of the Line of Law firm of attorneys, spoke about several cases involving defense of pledge creditors in bankruptcy.

The Conference moderator, Sergey Akinin, thanked the participants, saying in conclusion that “every year the conference draws professionals wishing to share their experience with others, improve understanding between creditor and debtor, and adopt advanced practices and standards in their own business. We believe that we can and must give credit health to the nation.”