Bowe: Pandemic has heightened banks’ borrower scrutiny

As part of the fallout from the COVID-19 pandemic’s weakening of the country’s economy, banks will likely apply greater scrutiny to those people who are looking for credit, Chief Executive Officer and Director of the Fidelity Group Gowon Bowe said yesterday, though he contended that the opening of the credit bureau will eventually make classifying good and bad borrowers simpler.

Bowe, who was a guest on Morning Blend Business on Guardian Radio, said the pandemic revealed the industries most vulnerable to shocks in The Bahamas and has undoubtedly alerted commercial banks to take closer looks at borrowers in those industries.

“We have industries that can be severely impacted by events like this… I mean the tourism industry is known to be impacted by recessions, by travel advisories and the like,”  Bowe said.

“And so sometimes there’s going to be just that prudent assessment that says, ‘do I have an individual who has the capacity to pay and what is the risk that there may be interruptions?’”

And while there is a worry that the credit bureau will prevent people from accessing credit, Bowe explained that the bureau could have the opposite effect as it allows banks to pinpoint less risky borrowers.

“The credit bureau, though being feared, should not be, because what I would say is right now we have a situation where it is very hard to decipher between good borrowers… and those borrowers that will duck and avoid you knowing they have obligations all across the country,” he said. 

“Credit should expand and should become more available to those who have demonstrated good credit practices and it will become more difficult for those who have demonstrated bad credit, which it should be.”

According to Bowe, banks’ decisions to lend could become a slightly slower process in the aftermath of the pandemic, but he maintained that many of the other processes around lending will not change.

He said the economic environment laid bare by the pandemic has simply forced banks to make adjustments to ensure their own continuity, as loan defaults mounted last year and continuing into this year.

“I would not say that there would be any concerted effort to contract lending, because ultimately a bank only makes money by making smart lending decisions,” said Bowe.

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source https://thenassauguardian.com/bowe-pandemic-has-heightened-banks-borrower-scrutiny/