Heavy Weather Banking: Corporate Debt Restructuring in Times of Crisis

05 January 2022
Knowledge Base

The COVID-19 crisis is creating big financial problems for many corporates, particularly when current government support comes to an end. The banks are insufficiently prepared to deal with those problems, as former banker and restructuring consultant Rob Wijman writes in his book Heavy Weather Banking. ‘Just like a hospital, a bank needs an Intensive Care department with sufficiently skilled staff.’

Dutch and international banks are insufficiently prepared to deal with the consequences of a new financial economic crisis. The wake of the current pandemic will likely cause such crisis, and banks need to be better prepared to deal with it, according to Rob Wijman. However, as he concludes in his book Heavy Weather Banking, the banks are insufficiently equipped to do this.

Wijman: ‘The previous financial economic crisis started close to fifteen years ago, and it has been business as usual for quite a few years. Meanwhile, banks have other major concerns, like fighting money laundering and other financial crime. As a result, much less attention has been paid to potential credit problems and credit losses. Intensive Care (also known as restructuring and recovery) departments have been downsized or even closed. That is not really smart, given that the bank needs skilled staff to provide first aid and intensive care services to corporate clients that need it.”

Bad for your relationship, your reputation, and your return

Rob Wijman was global head of the international restructuring and recovery departments at ING Bank for many years. He was responsible for the management of corporate credit problems, both for listed companies and family-owned businesses. Wijman has also been giving restructuring workshops to bank employees for many years, in order to educate them how to deal with distressed corporate businesses. In his book he explains, based on practical case experiences, what the bank can do – and should do – to manage credit problems including potential bankruptcies.

According to Wijman there are at least three good reasons to actively support companies that have financial problems: ‘if you do not diligently manage your corporate credit relationships, it will damage your relationship with the client, it will harm your reputation to the outside world, and, eventually, it may cost you a lot of money. It is a win-win situation: when your corporate clients are doing well, your bank will also do well.’

Clumsy banks

In his book, Wijman doesn’t deny that banks have made mistakes. He describes how a bank lost tens of millions because it trusted a well-educated cosmopolitan investor who came up with a good story. Not only Dutch, but all banks have had massive credit losses because they neglected early warning signals.

Heavy Weather Banking is packed with practical case studies, and for a good reason. Wijman: ‘It is very important to learn the lessons from situations that go wrong. Banks should do more in that respect. We now see many bankers that know everything about logarithms, but have never experienced a bankruptcy of a major client like Parmalat, Petroplus or Yukos, let alone a complete crisis. My book will help banks to learn from their mistakes, and how to do better.’

The author, Rob Wijman, is one of Europe’s leading loan workout and restructuring bankers with a deep and global experience in high profile cases. Wijman provides training, workshops and lectures on corporate crisis situations in addition to advising distressed businesses.

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