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Senior credit risk professionals from across Europe attend Experian’s Credit Risk Summit in Istanbul

By CreditMan Thursday, November 25, 2010

At its Credit Risk Summit in Istanbul, Experian today outlined to Europe’s most senior financial sector credit risk professionals the key strategies to help manage credit risk most effectively, particularly when operating in countries facing austerity measures.

With growth and unemployment levels in Norway, Sweden, Switzerland and Finland currently better than the Eurozone average and deficits within the Maastricht limit of three per cent of GDP, austerity measures in these countries will be minimal or non-existent. Experian’s analysis suggests that lenders are best placed to focus on enhancing the sophistication of underwriting techniques, allowing them to better understand and attract new low risk customers, and to maximise the value of existing relationships.

In contrast, lenders operating in Portugal, Ireland, Greece and Spain will be faced with the challenge of dealing with significantly more accounts rolling into a delinquency position. The environment will be fuelled by extensive austerity measures seeking to tackle deficits in excess of twice the Maastricht limit, unemployment running at higher than seven percent and growth less than the Eurozone average.

While growth opportunities still exist for lenders that can precisely identify risks and react to changing customer circumstances, Experian’s experts explained to delegates at its Credit Risk Summit that it will be vital for companies to ensure their collections operations can cope with the influx of new cases, and that they have the information they need to fully understand the individual circumstances of each customer. Effective collections strategies will be particularly important in Ireland, where household debt exceeds 80 per cent of GDP.

Meanwhile, Experian advised that credit risk management in Germany, Netherlands, Italy, France, Austria, Belgium and the UK should be focused across the entire credit lifecycle.

The large amount of internal data that lenders possess can be blended with external information, where available, to provide valuable additional insight for determining the level of risk each customer represents, the opportunity to inform cross-sell strategies and to react quickly to a deteriorating financial position.

In addition, in Germany, Netherlands and the UK, where household debt is greater than 50 per cent of GDP, lenders should ensure their collections capabilities are operating as effectively as possible, to ensure they minimise bad debt losses, and rehabilitate customers suffering short term cash flow problems.

Encouraging economic growth and relatively low levels of household debt in Russia and Turkey suggest that they are relatively good opportunities for new consumer lending. For lenders to maximise the opportunities in these, and other Eastern European nations such as Poland, Czech Republic, Slovakia and Slovenia, they will need to enhance their sophisticated risk management capabilities across the credit lifecycle.

David Groom, Managing Director at Experian Decision Analytics EMEA, comments: “The austerity measures across much of Europe create new challenges as well as opportunities for lenders. While priorities will differ from country-to-country, those that use data, software and analytics will be able to add even greater sophistication to their underwriting, customer management and collections capabilities and will be well placed to adapt to the pressures facing consumers.”