Staying cool in a panic: How to cope with increased demand created by CBILS
Globally, governments are doing their best to create unprecedented financial packages: the UK is no different. In March, the government announced a £350 billion rescue package, which has subsequently been enhanced, added to, and tweaked in the hope that it will mitigate the damage caused by the financial effects of COVID-19. This resource package exceeds the 2008 bailout plans the UK government implemented to deal with the financial crash – which is hardly surprising given that all facets of business have been impacted and disrupted by the pandemic.
In addition, the government, the Bank of England and the FCA (and other regulators) are “encouraging” all financial institutions to show forbearance to both the retail and the corporate sector – with the focus being on consumers and Small to Medium Enterprises.
What are the key issues that are going to be impacting you as a financial institution?
- Bounce back loan scheme:
Launched on Monday 27th April the scheme had received over 45,000 applications within the first week.
As a lender you are simply providing processing services to your clients since 100% of the loan is underwritten by the government. But how are you going to support the huge volume of applications that are expected to arrive? How are you going to deal with AML/KYC checks and identity verification?
- The Coronavirus Business Interruption Loan Scheme (CBILS)
The scheme provides financial support to smaller businesses (SMEs) in the UK who still must pay their bills even though many have suffered a total loss of revenue.
Challenges affecting you include:
Unlike the Bounce back scheme, you do have to underwrite applications for CBIL. Thus, some of the challenges you will incur are quite different to processing applications for Bounce back loans
- How do you avoid moral hazard?
- How do you assess the viability of the applicant whilst ensuring funds are not denied to otherwise worthy applicants?
- How do you undertake identity verification and deal with other aspects of the application process, especially where the applicant does not have an existing current account with you and the process has to be conducted remotely?
- How do you deal with the enquiries (telephone and email) from potential applicants, especially where time is of the essence: businesses will already be on the verge of bankruptcy?
CBILS and other schemes of this nature and size being rolled out in such a short amount of time will face several challenges, one of them being the disbursement of direct payments to individuals and businesses having to apply for a record number of commercial loan applications. Thus far £2.6 billion has been lent. UK Finance stated that £1.45 billion of rescue finance was extended in the past week, doubling from the previous week. Whilst this rate of growth is to be applauded, it is still creating an immense amount of frustration for those trying to avoid bankruptcy as the process of obtaining funds, is, in the applicant’s view, simply taking too long. It is obvious where the media’s sympathies are going to lie, thus creating an additional level of brand risk for you to consider. Traditional underwriting methods will not be enough to adapt to the new time constraints placed on banks to process the plethora of credit appraisals that government is guarantying 100% of. More efficient methods need to be adopted to save the 5.8 million small businesses who turned over an estimated at £2.2 trillion in 2019.
KYC and AML efforts will have to be increased to ensure that not only those who are eligible will get access to funds but also effectively and efficiently. Another key issue is that of the nature of the remote vetting and CDD. Limited face to face interactions could affect information gathered and so more caution needs to be implemented when conducting CDD remotely. This can also affect verification of key documents and information so financial institutions need to be more cautious of any forgery of any kind.
- Consumer finance forbearance:
The government and the FCA have ruled that car finance deals, mortgages and other consumer borrowing is not enforced in the same way that it would under BAU. In particular, car finance and mortgage lenders have been instructed/are being encouraged to offer repayment holidays – either from just the capital element or in some cases from the whole payment. It has also been estimated that 1 in 9 people in the UK has applied for mortgage holidays as the results of COVID’s detrimental effects on individuals bank accounts.
Challenges affecting you include:
- How do you deal with the enquiries (telephone and email) from potential applicants who will be inquiring about payment holidays and if they are liable for them?
- How do you cope with the influx of processing payment holidays as well as getting key information and communication to your clients promptly?
Consumers are concerned that the over-indebtedness where interest continues to accrue during a payment deferral period will be too much to cope with once things start to stabilise and payments holidays come to an end. Processing these applications for payment holidays and dealing with the number of calls and other consumer contracts are placing an unprecedented amount of pressure for providers to cope with the additional demands. Added to that are the borrowers who have simply, and unilaterally without consultation, cancelled their direct debits because they perceive they are entitled to do so hand could risk ending up in arrears as a result as well as further credit risk. Now lenders are faced with an increased demand placed on their call centres with borrowers waiting hours to try and rectify payments terms and conditions. Some lenders are now asking borrowers to get in touch with them via online request submissions as the demand is too high to deal with.
- Data Subject Access Requests:
We have heard reports that the ICO has allowed to the temporary suspension of the production of DSARS to CMCs who are running PPI claims and other claims. A key issue will be the negative press that could result from claimants not getting their payments on time. This could lead to brand and reputational damage.
Challenges affecting you include:
- How will you mitigate potential negative press associated with claimant complaints?
- How are you going to deal with an influx of DSARs, gather and provide the requested information promptly?
- What methods of judgment will staff be trained on in the absence of financial forecast information?
When a DSAR request is submitted, organisations must provide them with a copy of any relevant information relating to the individual. This can prove to be a difficult task depending on what kind of information the individual asks for as all information about the individual may need to be pulled. Doing so quickly is another issue, and with an influx of requests, banks will struggle to provide DSAR requests in the time frame requested.
- How will this all be achieved and implemented?
To cope with the sheer volume of the loans and tax incentives the UK government aims to provide will require additional resources to ensure what the UK government has set out becomes a reality but also offers a system of longevity. Post COVID-19 all these credit approvals, payment holidays and any other government schemes need to be placed back to original systems and procedures and that too will require a resource pool of administrative roles. This means claims remediation will be in the thousands, not to mention the sheer volume of repapering of contracts that will need to be revised. Those in financial services will be inundated with additional demands placed upon them that will have to be processed efficiently and effectively and the only way to do so will be with the implementation of additional contingent workforces.
- How are workforces changing to adapt?
We have seen two key trends in workforces over the last several weeks. The first being the change from permanent roles to contingent ones, and the second, organisations cutting costs by hiring on a project basis rather than attaining permanent staff. Now more than ever individuals are leaving their 9-5 roles as a result of redundancies caused by the pandemic. Many have taken on new remote contingent roles in varying industries, especially in customer services and various eCommerce platforms. Organisations are also turning to the contingent workforce to drive additional pressure placed on them to cope with increased demands they are and will be facing. Trends in the market reveal that many organisations are starting to plan for the influx of work they can expect in the months ahead now and are doing so by resourcing a contingent workforce that can solve the issue of additional demand and supply.
- Are you preparing for the post-COVID-19 world?
The post-COVID-19 world will present enormous amounts of opportunities for those who are prepared, and many are starting their preparations to transition into new market norms by equipping themselves with contingent workforces. The time is now, and many have started their endeavours of recruiting these contingent remote workforces, to ensure they will be ready for when the wave of new work comes in.
For over 30 years Momenta has deployed skilled contingent professionals within the Financial Services especially during times of crisis when organisations need to implement contingent workforces on a deadline. Today, our global ecosystem of over 30,000 associates, provide professional services to leading companies worldwide. Our clients rely on this knowledge and experience to fill their own skills gap, delivering on key projects both efficiently and economically.
More importantly, our specialist industry experience ensures we understand the actual tasks that you may need assistance with, which allows us to pre-screen effectively rather than provide volumes of CVs or bodies that may or may not be applicable. Further, our account managers will be familiar with your challenges and understand not only the deliverables you need to provide within your organisation but the challenges you will be facing in setting up the units you require in order to satisfy your organisation’s objectives and the public’s expectations of it.