Problem Asset Management: Principles and Practices

If you make loans, you will encounter problem loans. No lender intends to make a problem loan, lending institutions must anticipate having some level of problem loans and loan losses. Problem Loans are simply a by-product of the business of lending. While there are different strategies for managing and resolving problem loans, the underlying problem is the same – a lack of cash flow to pay creditors and operating costs.

Resolving problems can be expensive and difficult, and managing problem loans properly is a complex, time-consuming task, frequently requiring specialized knowledge and expertise in, credit analysis, bankruptcy and security laws, as well as negotiating. The overriding objective in managing problem loans is to improve the lender’s position enough to get repaid in full.

This webinar provides an overview for those wanting to know the basics of sound problem asset management.

Problem assets can create significant risks for organizations. If left unmanaged, they may lead to substantial financial losses, insolvency, or reputational damage.

Delinquencies and losses are rising as the business cycle rolls through this period of higher interest rates and higher operating expenses cut into borrower cash flows and as tightening loan requirements reduces credit availability. Finding and resolving a problem loan in its early stages is much easier now than later. This session will help you diagnose and cure now.

To analyze the preventive maintenance of its red flags of problem loans, and portfolio signals, e.g., declining communication from the borrower, the slowdown in financial information, deterioration in risk ratings, covenant breaches, overdrafts, and delinquency.

To review problem asset policy, when to transfer problem loans to problem asset management, e.g., criticized and classified assets, non-accrual, charge-off, and OREO asset management.

To evaluate problem asset management, it’s the process of default, judgment, foreclosure, possession, OREO, reporting, disposal; negotiation issues, and tips.

This session covers the following Major Topics: 

• Introduction
• Credit Culture’s role in PAM
• Credit policy
• Risk ratings
• PAM
• Failure
• Identification
• Management
• Resolution

Problem Asset Management refers to the systematic identification, assessment, and resolution of underperforming or problematic assets within a financial institution's portfolio. These assets can include loans, real estate, securities, or other financial instruments that have deteriorated in value or are under stress due to economic, operational, or regulatory factors. Effective management of problem assets is crucial for maintaining the financial health of institutions, particularly in sectors such as banking, investment management, and real estate.