“When we are no longer able to change a situation – we are challenged to change ourselves.” – Viktor Frankl
Hello Readers, I repeated an article that was first published in February 2014 and which I found still relevant in today’s banking environment. Today I bring you the concluding article, which attempts to list some writings on the wall or danger-signals on the part of the defaulting borrowing customer, which bankers should take a look at because they are not found in the books.
The Customer signals
- Does your customer always drop hints of acquaintance with people in high places, and always seem to be walking in the corridors of power?
- Does your customer speak directly with your top management personnel and have no respect for you? Does he just barge into your office, giving directions supposed to be issued by your boss?
- Is your customer over-trading? Do you find sudden increases in the stocks without additional financing from your bank?
- Does he avoid questions about any sudden expansion in the business? Assuming you have bought one truck for him to operate a business, within a short time you find he has acquired about four more trucks which you did not finance! There is nothing in the account to reflect the business’s expansion. Multi-banking is good, but without any transparency you are heading for trouble. Your bank can even syndicate with other banks to make the project more viable.
- Do you find stagnation in the customer’s account turnover with your bank (hardcore) while new stocks continue piling up in the shop or factory? Assuming the financing was for rice, does your visit now reveal thousands of bags of sugar for sale? Your funds have obviously been diverted. Your customer is “robbing Peter to pay Paul”. He will boldly tell you that he is diversifying his business. What experience has he in the new ‘uncharted waters’? Does he know the little tricks in the new business?
- Is your customer being chased by several bankers for his/her business?
- When you attend the customer’s social activities, like funerals, do you see other bankers competing for attention and giving huge donations? This means that your customer has become a ‘hot-cake’ on the bankers’ block.
- Does your customer, whom you have nurtured from a small ‘table-top’ business into a sole proprietary stage and now to a big corporate stage, now feel embarrassed to be associated with you?
- Has the customer stopped taking professional advice from you?
- Has your customer stopped picking-up or returning your telephone calls? Go for unannounced visits, and you will see your competitors there.
- Have you noticed that your customer has removed all your bank citations, medals, awards and souvenirs which he/she proudly displayed in the office previously? There are big competitors now, and your customer does not want them to notice that your bank is also in the picture.
- Have you noticed that the customer is building a new house, has ‘acquired a new wife’, has purchased new cars while the business is going down?
- Do you find many relatives of your customer working in sensitive places in the company, while non-relatives feel disowned despite their long stay in the customer’s business?
- Is he/she issuing huge cheques to churches as he/she chairs various churches’ fundraising programmes, although he/she does not have enough funds in the account to support the venture?
- Do you see your customer suddenly become influential in the community, and even venturing into politics or co-financing politicians?
- Does your customer issue cheques covering statutory payments without making funds available? He knows you will not feel comfortable dishonouring cheques issued to VAT, SSNIT, ECG, GWC and even salaries. How smart!
- Does your customer present a cheque of an unknown subsidiary company at the end of the month, knowing full well that it will be dishonoured by the paying bank…it is only camouflage! Make an attempt to pay against uncleared funds and you will be in a bad situation. He/she is putting cotton-wool in your ears. That is the beginning of ‘cross-firing’.
- Has your customer been lodging cheques, mostly made up of round figures from his other ‘sister account’, into his account held with you?
- Has your customer informed you that he/she has sent forex abroad through another party to import some new ‘fast-moving’ goods?
- How many visits have you made to your customer’s house to recover the loan? Most of the time you only meet the wife, who may not be a director in the business. What happens to your duty of secrecy? He is always ‘out of town’ – don’t be fooled. He is around and comes home late after mid-night when the bankers have gone home.
- Have you tried visiting at dawn? Interesting scenes…he can run, but he cannot hide. Eventually the hide and seek with bankers take its toll on him…. And of course the funds are depleted. The next time you see him in town his car has been sold, his house run down and is looking unkempt.
Customers Copying blindly
- Is your customer copying blindly from other businessmen?
- Does he/she want to take advantage of a government grant just because he/she happens to have the connections to access it? When the imported machines or goods arrive, another round of trial and error begins. The bank is not in the business of selling, so call it quits before it is too late.
- What about the almighty ‘Commodities Market’? Is your customer aware of the intricacies involved in international trade? Does she/he understand the various terms of trade and terms of payment?
- Does your ‘middleman’ customer who buys and sells rice in the local market now want to import rice?
- Does he/she know the intricacies involved that will make it profitable for him/her, or does he/she think the cost price and selling price are the most critical issues?
- Have you heard of some rice importers eventually selling their unsellable rice as ‘chicken feed’?
- Have you heard of wholesale maize sellers ending up selling their bug-infested maize to the poultry feed market?
Let me tell you the true story of a well-known fishing middle-woman at the Tema Fishing harbour in the late 1980’s. This lady’s main line of business was buying large amounts of frozen fish for retail to buyers from across the country. She decided to go into importing fish! She was a stark illiterate and would not listen to her bankers. She thought she had also ‘arrived’ by being the importer of a whole vessel of frozen fish. To cut a long story short, she made heavy losses and nearly lost all her life-long acquired property. If you are a businessman and wish to enter a new line of business, please read the history of the business, noting the past failures of others so that you do not repeat the same mistakes.
Sometimes it really hurts when you see the signs or writings on the wall showing that you are losing a customer to competitors, as well as the monies you lent out. With some of them, it is better to grant them additional financing or re-engineer the financing to enable them succeed if that is the issue. Sometimes it’s worthless to use good money to follow bad money. However, there are times when it is better to allow them to go, so long as they manage to repay the facility. Let the competitor pay off your customer’s loan if that is their wish. In some cases, you find that it was a God-send and even good riddance! Move on.
Sometimes many customers flock to new banks to take advantage of new promotions and products – but some of them eventually return to their ‘old faithful’. Why? They found that the new banking relationship was not the same as advertised!
My final words
Once again, I don’t have the answers because each customer’s case of default depends on different causes. My duty is to use my binoculars to watch the risk signals from across the world and let you know how best to avoid the ones not taught in business schools.
Continue asking questions and watch out for any writings on the wall, and use your risk management skills to clear it from the blackboard.
Dear Bankers, I still wish you Happy and Safe banking. See you next week.
About the Author
Alberta Quarcoopome is a Fellow of the Institute of Bankers, and CEO of ALKAN Business Consult Ltd. She is the Author of two books: “The 21st Century Bank Teller: A Strategic Partner” and “My Front Desk Experience: A Young Banker’s Story”. She uses her experience and practical case studies for training young bankers in operational risk management, sales, customer service, banking operations and fraud.