ACCOUNT OFFICER’SBASIC TRAINING

Zero Tolerance Against DelinquencyAlarm Signals

ObjectivesObjectives

• Discuss “alarm signals” of delinquency

• Review steps to respond timely and effectively to prevent delinquency from escalating

PAR 1-7 DAYS

PAR 8-30 DAYS

PAR 31 -60 DAYS

PAR 61 -90 DAYS

PAR OVER 90 DAYS

Minor Risk, but needs to

be watched

Moderate Risk

Serious Risk

Low Chance of Repayme

nt

LOST!

STAGES OF DELINQUENCY

FRAMEWORKFRAMEWORKPREVENTIVE STAGE 1-2 STAGE 3-4 STAGES 4-5

MINOR TO MODERATE RISK AS PAR AGING

INCREASES

SERIOUS RISK HARDENED

UNCOLLECTIBLE

Loan is 1-30 days past due Loan is 31- 90 days

past due

Loan is over 90 days past due

(1) Loan Evaluation

- character assessment

- cash flow analysis

(2) Loan Monitoring

Actions:

-Follow Delinquency Alarm Signals-Collection/follow up by field staff, including AOs, supervisors and branch manager•Attach assets•Debit savings balances

Actions:•Collection by AOs/ BMs•Atty.’s demand

Actions:• Write Offs• Remedial Mgt• Debt Recovery• Legal options• Collection agency

Provisions

2% of outstanding balance of loans

Provisions•20%:PAR 31-60 days•50%:PAR 61-90 days

Provisions•100% on PAR over 90 days

PREVENTIVE

Zero Tolerance against DelinquencyZero Tolerance against Delinquency

Zero tolerance means NO LEVEL OF DELINQUENCY IS ACCEPTABLE! Bank takes steps once a client misses a payment.

It is an institutional culture that defines the attitude of the bank management & staff towards loan delinquency.

The bank will seriously pursue collect missed payments and past due accounts, whatever the cost, to to maintain the discipline of zero tolerance against loan delinquency.

PAR 1-30 daysDelinquency Alarm Signals

Delinquency Alarm Signals : Alarm Signal No. 1 - Payment is delayed one (1) day

Actions to be TakenActions to be Taken

Account Officer MFU Supervisor Branch Manager Credit Committee

Determine cause of non-payment

Monitor & follow up action taken by AO to effect loan payment

Monitor & follow up action taken by AO to effect loan payment

.

Informs Supervisor and BM

Collect from spouse/co-borrower

Follows up loan payment and asks borrower to pay penalty fee within 24 hours of default

Delinquency Alarm Signals : Alarm Signal No. 2 - Payment is delayed three (3) days

Actions to be TakenActions to be TakenAccount Officer MFU Supervisor Branch Manager Credit

CommitteeCollect from spouse/co-borrower and co-maker/s

Supervisor accompanies AO during visit to client

Monitor & follow up action taken by AO & Supervisor to effect loan payment

Monitors progress of actions taken by MFU re: clients with delayed payments

Reports clients with delayed payments during weekly CreCom meeting

Verify if client and co-maker are real.

Validate if the co-makers understand their liability and willing to pay.

Verify reason of default

Deliver 1st Warning Letter signed by the Supervisor

Sign the 1st Warning Letter

Delinquency Alarm Signals : Alarm Signal No. 3 - Payment is delayed one (1) week

Actions to be TakenActions to be TakenAccount Officer MFU Supervisor Branch Manager Credit

CommitteeCollect from spouse/co-borrower and co-maker/s

Monitor & follow up action taken by AO to effect loan payment

Monitor & follow up action taken by AO & Supervisor to effect loan payment

Monitors progress of actions taken by MFU re: clients with delayed payments

Reports clients with delayed payments during weekly CreCom meeting

If non-payment is caused by disasters affecting the business or household, serious illness or death of immediate family, Supervisor may recommend restructuring.

Deliver 2nd Warning Letter signed by the Manager

Sign 2nd notice

Delinquency Alarm Signals : Alarm Signal No. 4 - Payment is delayed two (2) weeks

Actions to be TakenActions to be TakenAccount Officer MFU Supervisor Branch Manager Credit

Committee

Collect from spouse/co-borrower and co-maker/s

Monitor & follow up action taken by AO to effect loan payment

Monitor & follow up action taken by AO & Supervisor to effect loan payment

Monitors progress of actions taken by MFU re: clients with delayed payments

Reports clients with delayed payments during weekly CreCom meeting

Follow-up recommendation on restructuring, if any

BM accompanies AO during visit to client

BM considers re-scheduling payment, based on supervisor verification of reason

for default.

Deliver 3rd Warning Letter signed by the BM

BM signs the 3rd warning letter

Delinquency Alarm Signals : Alarm Signal No. 5 - Payment is delayed three (3) weeks

Actions to be TakenActions to be TakenAccount Officer MFU Supervisor Branch Manager Credit

Committee

Collect from spouse/co-borrower and co-maker/s

Monitor & follow up action taken by AO to effect loan payment

Monitor & follow up action taken by AO & Supervisor to effect loan payment

Monitors progress of actions taken by MFU re: clients with delayed payments

Reports clients with delayed payments during weekly CreCom meeting

Advise borrower to go to the bank to withdraw from the contractual savings to effect payment

Delinquency Alarm Signals : Alarm Signal No. 6 - Payment is delayed four (4) weeks

Actions to be TakenActions to be TakenAccount Officer MFU Supervisor Branch Manager Credit

Committee

Enforce the voluntary offer to surrender

Monitor & follow up action taken by AO to effect loan payment

Monitor & follow up action taken by AO & Supervisor to effect loan payment

Monitors progress of actions taken by MFU re: clients with delayed payments

Reports clients with delayed payments during weekly CreCom meeting

Enforce the voluntary offer to surrender

NOTE : What is a Voluntary Offer to Surrender?• A document signifying the intent of the borrower to

surrender any of his/her valuable item(s) on a specified period in case he/she fails to forward the full payment of the loan on an agreed date. The bank can sell the item(s) in case the borrower fails to pay the loan 5-10 days after surrendering the item(s).

• Not a legal document, but binding. The ACT only becomes legal once the borrower signs an Authority to Sell;

• Surrendering the item(s) does not extinguish the loan; loan is considered paid once the bank receives cash in payment for the loan

Action on Agreement

Borrower ActionBorrower Action Bank OptionBank Option

Borrower surrenders item/s specified in VOS

Keep visiting client/remind about loan payment

Have borrower sign Authority to Sell, then sell item/s

PAR 31 to 90 days

• Continued Visit by Supervisor &/or Manager• Compile necessary documentations on

actions/steps taken by the MFU• Refer case to bank’s legal

department/counsel• Send demand letter(s) from the bank’s

lawyer

TO SUMMARIZE......

Delinquent Borrowers can be Delinquent Borrowers can be Classified into 3 Categories:Classified into 3 Categories:

• Borrower forgot to pay

• Borrower not able to pay

• Borrower not willing to pay

How to handle Delinquency

Bank ActionBank ActionBorrower forgot to pay Frequent visit and reminder

Borrower not able to pay Supportive measures or Debt Recovery Program:1. Extension of payment

2. Payment arrangement schemes

3. Shared payment with co-makers

Borrower not willing to pay TAKE LEGAL ACTION

REMEMBER:Constant follow-up is one of the keys to preventing and remedying delinquency.

Thank you!