Our latest European Credit Risk Outlook, developed with Efma, contains a snapshot of how risk managers in Central and Eastern Europe see the next six months. This region represents a great diversity of economies, at different stages of credit maturity and with different growth rates. But the usual pattern is expected: Portfolios backed by collateral (mortgage and auto) trend to be stable, while unsecured credit is more volatile. Of some concern here is the forecast rise in small business loan delinquencies by more than half of respondents – that’s higher than the numbers for any other loan type.
A modest credit gap is also in sight, as might be expected considering the delinquencies forecast. While 50% of respondents think the amount of credit requested by consumers will rise, 42% think the amount extended will rise; for small businesses, the figures are 39% and 30%. 
The combination of the season, macroeconomics and risk appetite recommends caution. The result? The “tug of war” between sales and risk is about to increase.
CEE is one of the few European markets seeing significant growth and, to balance revenue lost in the Western economies, it represents quite a nice opportunity to please stakeholders. Efma and FICO recommend a combined approach, using Big Data and capital optimization to support twin goals: increasing market penetration and revenue while maintaining risk levels. It’s not an easy task, but sound analytic procedures and data-driven strategies can help.
Finally, respondents’ priorities for 2014 show that financial institutions are generally well capitalized in the region, although risk managers will keep investing in system updates to satisfy the regulatory environment. This is an excellent strategy considering the multitude of central banks involved in the region and the presence of big multinational banks. Also refreshing is the focus on a better customer experience, connected with the focus on creating profitable customers and increasing lending volumes. A virtuous cycle indeed!
For similar views from across Europe, as well as from the DACH region and the UK / Ireland, download the full report.
