Expected loan defaults threaten to put a heavy burden on the banking system – RiskNET

The wave of postponed bankruptcies of small and medium-sized companies as well as the expected bankruptcies of self-employed people can become a great burden for the state and society – and also place a heavy burden on the entire banking system. Together with a possible reduction in lending, “a rapid economic recovery is unlikely,” says Jürgen Sonder, President of the Federal Association of Credit Purchasing and Servicing (BKS). On the NPL FORUM, the NPL Lending Industry Summit to be held online on November 25th, are possible Options and alternatives for the future are discussed.

“Because of the pandemic The restrictions that have been adopted deprive many self-employed people as well as small and medium-sized enterprises from the basis of their business, “says Sonder. But the extension of the obligation to file for insolvency postpones the bankruptcies into the years 2021 and 2022. For example, BKS expects a significant increase to over 100,000 personal bankruptcies in the coming year a further strong increase in private insolvency registrations is feared when the planned reduction of the residual debt discharge procedure to three years comes into force.

With the extension of the obligation to file for insolvency, the German economy is also postponing a bankruptcy problem with corporate insolvencies. There are currently around 4,500 corporate bankruptcies per quarter. “Even if the state continues to intervene as a buffer, we are assuming an increase of 40 percent to 6,000 to 7,000 insolvencies per quarter from 2021. This puts the banks’ capital situation in an extraordinarily stressful situation,” says Sonder.

The problem: If too many companies or private individuals can no longer service their loans at the same time, the banks reach their limits in terms of capital and resolution. “That doesn’t just apply to what is to be provided Venture capitalBut then also the real costs of loan defaults, “says Sonder.” The banks are faced with enormous challenges simply through restructuring tasks and the processing of non-performing loans. “

It is crucial that the banks remain able to act. Sonder: “The secondary market for bad debts can represent a building block for financial market stability in order to more effectively manage the post-Covid effects in the financial industry.” Prof. Dr. Christoph Schalast, Chairman of the Advisory Board of the BKS and Professor for Mergers & Acquisitions, Business Law and European Law at the Frankfurt School of Finance & Management: “In the next few weeks, the course must be set for efficient secondary markets at EU level. At the NPL FORUM On November 25, banks and supervisory authorities will therefore also discuss European rules for the credit market and NPLs. “

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