ING's approach to managing "shared pain" once repayment pauses lift
Transparency and regular customer engagement will be key in ensuring that ING manages the ‘shared pain” once the repayment deferrals under its COVID-19 support ends for its customers.
Like all the other banks, ING swiftly moved to provide support to both its retail and business customers offering repayment deferrals on their loans of up to six months.
Speaking at a recent FINSIA webinar, ING CEO Uday Sareen responded to an audience question on how banks will have to manage the impact of these payment pause holidays on their customers once the six months are up - highlighted in the webinar as balancing the responsibility of the bank with customer obligations or "shared pain".
While these customers may have a reprieve in their repayments, they will still be burdened by the need to repay both the principal and interest once the six months ends.
Anecdotal data from RFi Group to date suggests that 2 in 5 customers indicate their income has decreased as a result of COVID-19 and not surprisingly, the proportion is higher among younger customers.
Sareen acknowledged that for some of the bank’s customers sought support not because they had a cash flow problem but because of peace of mind – it’s a view also echoed by ANZ’s Shayne Elliott.
However, going forward, the ING chief said that it will be important that there is transparency and that customers are aware of their obligations, that is they still need to make the repayments after the pause ends.
“As we move into the three month process where we are now checking in with our customers, it is important for customers to understand their financial situation and for the bank to help them move forward,” Sareen said.
In ING ‘s case the bank has ensured that there's no accrual of interest. It is just capitalized and therefore there are no extra charges to the customer or as Sareen puts: there is no “so-called financial benefit which is accruing to the bank”.
At the same time, Sareen is aware that the bank will confront “strong negative pressures’ in terms of serviceability challenges as households and businesses emerge form the pandemic.
This of course will also be dependent on whether the economy moves to a V shaped or U shaped recovery or as Sareen adds a "Nikey Swish".
“It is not just about offering the repayment pause and then expecting that it will end in six months. We will have to really look at what parts of our portfolio that will have the additional stress and how do we offer that assistance to our customers.
“There is going to be traditional pain but the bank will be will taking part of that [pain] and offer support to customers.”
Sareen who chairs 8am daily meetings form home now with his management also believes the way the bank manages its staff and customers will change forever even once the pandemic eases.
And it won’t just be about customers accepting “dogs barking in the background” but also there will be a different assessment of risks that boards and management in terms of businesses continuance.
In terms of productivity, Sareen said there has been an uptick in parts of the business.
The crisis is also providing an opportunity to look at the structural changes in terms of costs.
“As we have seen an instant acceleration to mobile working, we also have a one-time window to plan for better efficiency and productivity and cost management.”