How to climb a mountain – a step at a time

This week, the general stupor from the holidays seemed to lift and we all found ourselves standing in bright sunshine, staring at each other. It dawned, maybe, just how high the mountain of work for 2021 is. A sense of urgency has returned.

So it was a burst of activity on the current challenges on the horizon.

Breathing Space. This new consumer regulation is due to go live in May. Although this was being discussed last year, for January we have started off seeing more activity. Likely an issue, especially for large lenders, with multiple products, systems and complexity. We should expect even more as we get closer to the deadline.

Bounce Back Loans. Another issue from 2020 becoming a hotter topic now. An interesting discussion hosted by CharterBanker this week clearly laid out some of the issues; moral hazards embedded within the UK scheme, the strategies to best approach collections for these loans. The CSA, as the industry trade association, provided guidance to try to move this conversation forward too. With expected peak delinquencies to occur in July/August, the sense was now is the time to prepare.

Declining spending and declining balances. Data this week showed how we have all been spending less on clothes, amongst other things. As for lending, we have also seen declining balances on credit cards, as people who can afford to, have used this as an opportunity to reduce amounts owed. With COVID the economic cycle of borrow and spend, seems to be faltering a little, at least for now. All of this could have some significant knock-on effects for the economy, and the banking and lending industry in general reducing profitability. We know there is pent up demand to lend, but without demand more business transformation may be needed. One for the radar.

Negative interest rates. In a talk last week, the Bank of England, reignited talk of negative interest rates in the UK. This of course would mean that there would be a charge for keeping money on deposit, and low cost lending for borrowers. How this would be achieved systematically, given it has not been done before, has shades of Y2K behind it. It does sound like this is coming back as a discussion.

Brexit and data. I am not quite ready to discuss this topic on here just yet, although was on a bruising guidance call discussing some of the new implications and regulations now required for export. However still on the horizon is the UK getting a data adequacy decision. We have a bridging agreement for now, but a decision is needed (or an extension), by 30 April 2021. If not data transfer and data infrastructure will become incrementally more difficult. Definitely, one to watch.

The year is now well and truly up and running. Have a good weekend everyone.