Soon after the regulatory authorities made public the
new provisioning requirement an urgent meeting was called on our
friends Bank Headquarters.
The president of the Bank showed his concerns:
“Dear colleagues, we have 4.000 million Euros in Real Estate properties, most of them have remained in our balance for more than one year. The real estate market is stopped at the moment, and if we sell those properties at the current prices, we’ll have to declare enormous losses”
“As you know, most of those properties come from defaulted Mortgage Loans. At the time, we could rescue our Bank results by accepting the Real Estate Collateral in exchange for cancelling the loan. We thought that if we waited for the market to recover, we could sell them at the valuation price, but the market didn’t recover. And now, with the rising unemployment is impossible to sell those properties at the former prices”.
Then the Sales VP replied; “I have the solution, there’s still a big demand for mortgage loans. We could offer those flats with an assigned financing plan, so we’ll increase our business and we’ll get rid of those “toxic assets”.
“This is a brilliant idea”, the president said. “Why haven’t we done it before?”
The Sales VP answered; “We’re facing difficulties on getting our Loan Quotations approved by the Risk Department”.
The President, disappointed asked the Risks VP; “Why are you making difficult to increase our profits and solve our problems? I don’t like this attitude”
The Risks VP answered; “We analyze all the quotations, the income of the client, his education level, unemployment rate in the region, etc. And of course, we approve every proposal which passes the approval mark”
Well, well, the president said. “I hope everybody understands that the situation is serious, and I need my team to give me solutions, not more problems…”
They finished the meeting and agree to meet again in two weeks for discussing the proposals.
What will our friends do?
We’ll talk about it in some days.
Looking forward to read your opinions.
Kindest Regards.
Ferran.
The president of the Bank showed his concerns:
“Dear colleagues, we have 4.000 million Euros in Real Estate properties, most of them have remained in our balance for more than one year. The real estate market is stopped at the moment, and if we sell those properties at the current prices, we’ll have to declare enormous losses”
“As you know, most of those properties come from defaulted Mortgage Loans. At the time, we could rescue our Bank results by accepting the Real Estate Collateral in exchange for cancelling the loan. We thought that if we waited for the market to recover, we could sell them at the valuation price, but the market didn’t recover. And now, with the rising unemployment is impossible to sell those properties at the former prices”.
Then the Sales VP replied; “I have the solution, there’s still a big demand for mortgage loans. We could offer those flats with an assigned financing plan, so we’ll increase our business and we’ll get rid of those “toxic assets”.
“This is a brilliant idea”, the president said. “Why haven’t we done it before?”
The Sales VP answered; “We’re facing difficulties on getting our Loan Quotations approved by the Risk Department”.
The President, disappointed asked the Risks VP; “Why are you making difficult to increase our profits and solve our problems? I don’t like this attitude”
The Risks VP answered; “We analyze all the quotations, the income of the client, his education level, unemployment rate in the region, etc. And of course, we approve every proposal which passes the approval mark”
Well, well, the president said. “I hope everybody understands that the situation is serious, and I need my team to give me solutions, not more problems…”
They finished the meeting and agree to meet again in two weeks for discussing the proposals.
What will our friends do?
We’ll talk about it in some days.
Looking forward to read your opinions.
Kindest Regards.
Ferran.
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