BCG helps Italian central bank with setup of bad bank

10 August 2015

The Italian central bank has hired The Boston Consulting Group to develop and establish a ‘bad bank’ asset management company, that will be used to deal with the pile of non-performing loans on the bank balance sheets left over from the financial crisis. The consulting deal is worth nearly €400,000.

Like the banks of many western countries, Italian banks have suffered the hangover of a period of liberal lending criteria, with many continuing to hold “bad debts” whose continued risk factors are a burden on the banks’ wider lending portfolio. To rid themselves of these bad debts, many banks globally – usually with the help of state aid – set up ‘bad banks’ in which the bad debt can be dumped.

The size of the bad loans held by Italian Banks tripled to €274 billion since the start of the financial crisis, and accounts for an estimated 16% of all loans, according to estimates from The Boston Consulting Group (BCG). The biggest defaulters are in construction, with 20% of all loan non-performing, followed by retail, with 17%.

BCG helps Italian central bank with setup of bad bank

To segregate healthy from bad loans, the Italian central bank recently decided to develop and establish an asset management company whose function it will be to liquidate bad debts. The central bank (Banca D’Italia) is working with the Treasury and the Prime Minister's office to identify the best way to reduce the weight of so-called "suffering" caused by the continued debt load. The process is being facilitated by The Boston Consulting Group – according to Italian media the consultants will receive €379,500 before tax in fees. BCG was awarded the contract without it going to tender, with the central bank citing that it had to move quickly in the light of the urgency of the matter.

State intervention in creating a bad bank with government backing, as in the case of Italy, is not being openly backed by the European Commission. The EU has been hesitant in supporting the plan, a stance based partly on the back of risks to Italy’s wider public finances. 

Consulting in banking
Policy makers in the banking industry regularly turn to management consultants to support strategic processes and/or complex transformations. In June the British Bankers Association for example commissioned Oliver Wyman to conduct an in-depth study on the competitiveness of the UK banking sector, while in Italy UniCredit earlier this year selected Accenture to help it improve its operational efficiency through the implementation of a new, technology enabled delivery model.


How data insights helped Network Rail improve the South-East route

11 April 2019

Amey Consulting has leveraged data insights to assist Network Rail with the improvement of its South-Eastern route. Using the Quartz tool, which monitors train movement, Network Rail will now be able to commit to data-enabled interventions to quickly improve underperforming train stations.

With rail services in the UK coming under strain from the demands of modern commuter life, while the infrastructure and service delivery of the nation’s railways has come in for sustained criticism in recent years, a period of regeneration is on the cards at last. Network Rail is the owner and infrastructure manager of most of the railway network in Great Britain, and has subsequently tapped the consulting industry on a regular basis to help find areas of improvement.

The group recently drafted in consultancy BearingPoint to conduct a thorough organisational evaluation and advise Network Rail (High Speed) on attaining a ‘fit for purpose’ organisational standard – for which the consultancy was nominated at the 2019 MCA Awards. Meanwhile, ArupArcadis and Aecom have been contracted to help Colas Rail and Babcock Rail implement a decade-long framework for Network Rail, aimed at supporting the delivery of the next generation of rail systems, with the contracts said to be worth as much as £5 billion

How data insights helped Network Rail improve the South-East route

As Network Rail further aims to improve its performance and customer service offering, another area it has sought help from the consulting sector for is its South-East route. The network of railways connects London with the southern parts of the country, as well as with Europe, making it the busiest in the country, with more than 500 million passenger journeys per year. This crucial expanse of rail was plagued with small minute delays, which were impacting millions of passengers every day, while reducing the efficiency and capacity of the overall network – something Amey Consulting was selected to help solve.

Amey Consulting soon determined that with the sub-threshold delays to services only lasting for 1 or 2 minutes, most were not the subject of detailed root cause analysis, and this made their corrections almost impossible – with dire consequences. Without addressing these delays, passenger satisfaction would fall, while the capacity and efficiency of the network would be reduced, stinging the income of Network Rail even before a host of delay-related fines would hit the company.

In order to help the client gain a better understanding of where, how, when and what these small delays occur, Amey Consulting looked to demonstrate the value of data-led consulting, with a significant reduction in delays within the first month of rolling out changes to key stations. The consultants embedded themselves in Network Rail’s team, helping them learn the key skills needed to support and apply data-driven solutions.

Agile transport

This involved the deployment of the Quartz tool. The system utilises to-the-second train movement data to present the performance of individual stations across the South-East route. It allows users to effortlessly understand station performance with a high level of detail, and use this information to identify losses caused by small-minute delays. The granular data allows for targeted actions to drive efficiency savings and performance improvements. More importantly, it allows users to understand the impact of small process changes on performance. 

Steve Dyke, an Executive Partner at Amey Consulting, said of the project, “We looked to identify the physical root cause on the infrastructure, building a case for change then managing that project implementation and tracking the benefit/value.  In doing so we are working to define a data performance improvement service to the operational and infrastructure owners.”

Just as important for the project as the technology, however, was teaching the Network Rail team how to leverage it after the consultants were gone. The Amey Consulting team worked to develop an agile working culture within Network Rail’s South-East division, helping staff to be confident in using data to improve the journeys of millions of people per year by attacking the problem from the ground up.

Dyke concluded, “This is less about the tools and about the approach to managing performance.  It meant using by-the-second analysis, data science, and then agile development to visualise and identify areas where improvements can be made.  We then worked with NR to change the way they approached the management of the infrastructure changes.  So rather than pass the information down the value chain, any of which could have been missed, we managed the change end-to-end.”

The project was so successful that Amey Consulting was also among those honoured at the recent MCA Awards. The firm scooped the Performance Improvement in the Public Sector prize for its work with Network Rail, at the 2019 ceremony in London.