The vital role of a flexible workforce for banks in managing borrowers in financial distress

The challenge for now, and ahead

As financial institutions gear up to manage the pending ‘mortgage interest rate cliff’, there are many levers that can and will be pulled. Some banks have already changed their stress testing standards, others have taken alternate steps – but all banks, brokers, credit unions and building societies know from the experience of Covid 19 that it is essential to get ahead of a potential problem, rather than let it happen to your organisation

Monetary policy settings are notoriously difficult to forecast, however, the broad consensus is that we are possibly close to the end of the interest rate tightening cycle – just as many tens of thousands of recent mortgage holders are  approaching the expiry of their  fixed rate mortgages. This applies equally to traditional home buyers as well as investment property owners.

The complexity of the challenge

Mortgage renewals are usually a standard and straight forward process, however due to the level of inflation, cost of living, inclusion of additional debts such as BNPL and other factors, many people have become ‘mortgage prisoners’ and will struggle with refinancing, and at a level which has not been seen previously.

Despite this, competition remains intense, and all Financial Institutions will want to retain and attempt to grow their existing market share. This creates a complex challenge for lending institutions – particularly given the potential ‘optics’ and the subsequent risk and reputational impact of mortgage foreclosure and  evicting people from their homes. No lender wants to do that, and every lender will do whatever they can within reason to avoid this.

Given the unique cultural nuance, focus and priority of Australians towards home ownership, this is further magnified, and creates an additional challenge for Financial Institutions to physically manage. Banks have adopted a ‘do more, with less’ approach in many instances, however 2024 will also see banks grappling with the potential introduction of BNPL legislation, as well as the enormous impacts of AML tranche 2 on industries which are not currently regulated.

This legislation alone will increase the number of entities captured and reviewed from circa 13,000 to more than 100,000.

The question for Financial Institutions

How then, do banks physically manage this process and scale their resources for the period in which they are required? This issue is further  complicated  as while the issues looming large in the short to medium term, they may well decline as a principal focus and concern shortly thereafter if interest rates begin to fall again.

How to respond

Given the number of mortgage holders under extreme financial and emotional stress, a careful, empathetic and considered approach must be tailored for each individual and circumstance. This cannot be a case of ‘one size fits all’.

To adopt a generic methodology of approaching this situation generates enormous risk to all parties. The inevitable fallout as people prioritise their homes will be to compound the risk of default on additional commitments such as car leases, credit cards, personal loans and other ‘secondary’ debts.

Resourcing for the Solution

The fastest and most effective way that Financial Institutions can successfully navigate this continually changing regulatory environment is to increase the size of the workforce who are customer facing and ‘on-the-tools’. In addition, these teams will be needed to scale up in a cost-effective manner as the magnitude of the issue becomes fully visible, and to be scaled to suit the profile of the ongoing needs and eventually reduced as these gradually decline.

A specialist,  flexible workforce can quickly adapt to new environments and to contribute from day one, accelerating the implementation process, helping organisations meet regulatory deadlines, Customer challenges and avoid the potential of penalties and reputational damage.

Engaging a specialist and flexible workforce is a more cost-effective solution than hiring permanent employees for short-term or specialised projects. Financial Institutions can avoid the expense and commitments of full-time positions, such as benefits, training, and long-term commitments. A  flexible workforce allows for the efficient allocation of resources, ensuring that organisations have access to the right talent when needed, and only when needed.

Given the intensity of competition for this talent is about to increase exponentially, how can companies avoid being left behind?  Contingent and FTC workforce solutions also have the enormous and additional potential of being converted to become permanent resources should the need evolve or remain at the end of their contract.

Momenta’s Resourcing Solutions

Momenta Group are tackling the actual issues flagged above backed by our more than 30 years of expertise working with organisations of all sizes. Momenta’s ISO certified process provides the high-quality solution of qualified and experienced industry experts with in-depth knowledge of the regulatory landscape. at an accurate market price for Financial Institutions of all sizes.

Using the expertise of Momenta’s specialist resourcing further offers Financial Institutions breathing space to resolve any additional issues their controls and customer facing teams may have. Setting up the right teams ensures any gaps are found before regulators further pressure on Financial Institutions to strengthen current compliance systems and controls, and ahead of significant penalties being issued.

If you are facing added regulatory, compliance or customer driven pressures, and need additional and experienced resourcing support, speak to us to see how Momenta can enable and support your existing team – with the right resources, when and where you need them, for as long as you need them.