It has been some time since the start of the global economic crisis, and over five years on, agencies in many different markets are still dealing with the repercussions of irresponsible banking and lending. Banking debt is still the dominant force in the UK debt collection market, with average annual flows above $8 billion since 2008. Ask any senior banker and they will tell you how difficult the last four years have been.

The difficulty stems from both the management of debt, and ensuring stability for the future. There are shifts occurring and things are looking up for the better, though it is still the job of banks to take further measures for the benefit of themselves and the wider economy.

Raising capital and disposing unsecured debt

Some of the most important current priorities for UK banks are to raise capital, to improve the state of the balance sheet and to reduce leveraging. RBS’s post-meltdown actions are the perfect case study; they have reduced their balance sheet by a huge amount, and have disposed of many of their non-core assets.

RBS still have a great deal more to achieve however if they are to reduce the exposure of their balance sheet. The further disposal of unsecured debt may be good news for the debt management sector and agencies like Wescot Credit Services, but this alone will not raise the type of capital that the banks need. More significant in the improvement of the balance sheet is the disposal of divisions that are high risk, and addressing the very dangerous problem of secured consumer lending.

The management of lending debt is no longer a priority

Many would expect unsecured lending to register high on the agenda, but this would be an outdated opinion. Excessive and undisciplined, unsecured lending stopped very soon after the financial meltdown, and not too long after the financial meltdown collections for unsecured lending reached a peak. In the time between then and now, there has been a steady reduction in collections flow. Recovery rates have been steadily improving.

Now that consumer lending has recovered significantly, and has woken up to the realities of unsecured lending, lending divisions are now starting to participate in new lending to grow revenues once again. The important question for the divisions to ask themselves now is exactly how they should operate.