Lessons Learned
From Loan Repayment Moratorium
2021-11-26
Advocate Business Consulting,
being one of the top IT consulting firms for the Hungarian
Financials Institutions had the opportunity to lead and
participate in projects concerning the implementation of the
Hungarian National Bank's Loan Repayment Moratorium mechanism for
nearly half in Hungary's bank. With the help of overall 25
experts, our company has gained a notable expertise in the field
which was translated into an internal training and coaching
material, a Lessons Learned summary that provides valuable
insights and best practices for regulatory compliance projects in
the field of Retail and Corporate Lending.
In case you're not familiar with the issue, in response to
the coronavirus pandemic's looming effects on the economy, the
Hungarian National Bank issued the Hungarian Financial
Institutions in March 2020 to introduce a loan repayment
moratorium mechanism for all debtors (corporate and retail also)
which allowed the delayed payment of the instalments. Technically
speaking, the debtors were not obliged to pay the scheduled due
payments, however banks had to enable methods for debtors to
opt-out from the mechanism (which was introduced as an automatic
opt-in way). The main milestones of the repaymant moratorium were
the following:
- 1. milestone: the mechanism was
introduced starting from March 2020 with an automatic opt-in,
covering all already started loan deals.
- 2. milestone: starting from 1st Nov
2021, the loan moratorium mechanism ended for most of the
debtors, by letting only a selected sub-set of debtors to remain
in the mechanism (debtors with more than 25% income decrease,
debtors with children or debtorswho are between jobs or retired).
Eligible debtors had to opt-in to stay in the mechanism.
- 3. milestone: 30 June 2022, end of the
moratorium mechanism, all participants must continue to pay the
instalments.
With the exception of the third milestone, all milestones
are behind us. During the design and implementation projects, our
experts helped tackle many challenges which were basically the
same for most of the Hungarian Banks, including:
- leading agile projects with tight
deadlines: the emergency situation to CoVid pandemic has
triggered resulted in very tight and strict deadlines. With the
introduction of the work from home method, initially it was very
hard to lead a successful a project, but our project managers had
expertise in working in these circumstances. With major and
not-so-major changes in the daily work (multiple daily standups
and instant video calls) the newly formed project teams were able
to act quickly and operating with beter-than-expected efficacy.
- working with hard-to-configure lending
systems: since the loan repayment moratorium mechanism
fundamentally alters the way how an annuity should be repaid and
the lending systems used by the banks were designed to handle the
standard loan amortization schedules, new solutions had to be
defined. Within the tight deadlines it was possible to introduce
new technical accounts in the Core Banking Systems that were
responsible for "collecting" the repayments that were not paid
(these amounts are meant to be repaid with 0% interest with the
same duration as the loan deal). Meanwhile, the loan repayment
schedules were modified in the Lending Systems by extending the
maturity date with the time being in the moratorium mechanism.
With these two parts (the "moratorium due" account balance to be
repaid and the modified maturity of the original loan deal) the
Core Banking part of the projects were carried out as quickly as
possible (not surprisingly, most of the Hungarian banks came up
with a solution like this).
- reaching out to the debtors: during the
first phase of the mechanism, an opt-out method must be provided
to the affected debtors which was overridden by an opt-in method
in the beginning of the second phase. That posed an extreme
challenge for both the branch operations and the contact centers
(working hours for direct client contanct were several shortened
because of the involved health risks), therefore the necessity of
digital channel developments became the reality. Fortunately, all
of the Hungarian Banks had at least one digital channel (either a
desktop Internet Bank or a Mobile Banking solution) available,
but for most of the cases, the secure online contact or providing
a legally binding statement was not possible without further
developments. With the help of our experts, several Hungarian
Banks were able to design and implement the necessary changes,
mostly with the help of our Ominchannel
Banking Standardized Framework.
The solutions for the mentioned challenges were almost
universally the same in all financial institutions:
- don't over-develop the solution, use whatever tools are
now available with the least possible development in Core
Banking.
- increase the effort and budget on digital channel
development.
- coach the project team members (even if you're not a
project manager) how to work within the new work environment.
With several examples availabe in the Lessons Learned
materail, Advocate Business Consulting has already conducted
several in-house training for our experts who were not primary
participants in the related projects - our experts feedback were
unanimously positive and reaffirming, making sure our company will
continue to synthesize lessons learned in common projects carried
on throughout the Banking industry in Hungary.