The effects of the COVID-19 pandemic are still lingering with new, and yet to be discovered, variants ravaging parts of the world, even in Singapore and beyond. While this is continuing, the Russian-Ukrainian war is adding more uncertainties to the global economy with inflationary hikes in food and fuel prices, which are spilling over to other consumer and non-consumer products. Parts of Africa and Asia are bracing for bad times ahead in 2023. Other things in the daily news headlines in all media include ongoing trade wars, the US dollar crisis, and serious financial problems of global banks such as Credit Suisse, Deutsche Bank, and Wells Fargo US. Big banks like HSBC and Citi are restructuring their assets and operations worldwide to stay ahead. Businesses are under pressure from falling consumer spending, rising costs of operations, and a tighter credit squeeze in some places.

During times of economic growth, bank management focuses on building assets and market share, with less attention to problem loans, because new revenues can more than offset the higher risk. In the times we are observing now, it appears only prudent to review credit risk management strategy as economies slow amidst uncertainties, and taking active steps is urgent to reduce negative consequences. Preparing for bad loans and managing them is not an option. It is a priority, and it should not wait.