A government-backed program of emergency loans poses an unusual challenge for banks – beginning with deciphering illegible loan applications.
Banks are ready to roll: UBS said it entlisted 300 bankers and tapped robot solutions to help with the onslaught of loan applications following a government-backed «bazooka» last week. However, banks are running into a mundane and unexpected problem in processing the mountain of requests.
Some institutes report that as many as half of applications are incomplete or illegible, according to a survey conducted by the VSRB, a lobby of Swiss regional banks. The survey was conducted at the end of last week, one day after the program kicked off on Thursday, with 38 banks participating.
Lending Slowed
Deciphering the «hieroglyphic applications» has slowed the loan process considerably. «Several banks said that it would otherwise be possible to grant a loan within 30 minutes,» VSRB head Juerg de Spindler told finews.com.
In two days, the regional banks said it had granted 2,800 interest-free loans backstopped by the Swiss government of less than 500,000 Swiss francs, and 50 more sizable ones. Meanwhile, Swiss giant UBS managed to process 10,000 and grant 1 billion francs, according to Swiss weekly «NZZ am Sonntag» (behind paywall, in German).
Program Soon Exhausted
Credit Suisse's tally is 1.24 billion francs through Monday to 7,800 firms. The government will need to consider hiking its 20 billion franc rescue package, finance minister Ueli Maurer told Swiss weekly «Sonntagsblick» (print edition only).
«The 20 billion are calculated conservatively. If things keep going at this pace, we're going to exhaust the program in ten days at the latest,» he said. All told, Swiss banks have granted 31,850 loans – and one-third of the original government package, according to Swiss newswire «AWP».
New Client Loans
Most of the emergency loans are going to existing clients, but some firms presents new relationships for the banks. «Some regional banks don't view an emergency loan as a good start to a client relationship, de Spindler said.
Because most applicants are existing clients, the compliance process is relatively simple. However, incomplete or illegible applications illustrate that even straight-forward transactions – loan applications are one page long – can be thorny in practice.
