Treat a restructuring as a new credit decision. The agent gathers the borrower's current position, models each option your policy allows, such as a longer term or capitalised arrears, and drafts a proposal with the cost of each. A credit officer decides. After the borrower signs, the agent updates the loan to the approved terms and nothing else.
What does restructuring involve, and who owns it?
Restructuring changes a loan's terms because the borrower can no longer meet them: the term is extended, the rate reduced, arrears added to the balance, payments switched to interest-only for a period, or part of the debt forgiven. Unlike a short payment holiday, it reshapes the loan for its remaining life, and it usually changes how the loan is classified on the lender's books.
That makes it a credit decision in its own right, with the same weight as the original approval. Whether an agent can make that kind of decision is answered in whether an AI agent can approve a loan. The head of credit owns restructuring policy. Named restructuring officers own each case. Finance owns any element that writes off debt. The wider frame is in our guide to AI agents in banking.
What does the agent do at each step, and at what depth?
- Agent, depth 1: reads the loan and its history. Terms, balance, arrears, previous arrangements, security, and for business loans, covenants and the latest accounts. Evidence: facts used, with sources.
- Agent, depth 2: gathers the borrower's position. For a consumer, an income and expenditure assessment; for a business, cash flow and a short account of what changed. Figures the borrower gives are recorded as declared. Evidence: the assessment.
- Agent, depth 1: models each option. For every option in policy: new payment, new term, total cost over the life of the loan, and the effect of capitalising arrears. Evidence: the model with its inputs.
- Agent, depth 1: checks options against policy. Maximum term extension, minimum payment, how many restructures the loan has had. Evidence: policy check per option.
- Agent, depth 2: drafts the proposal. The borrower's position, the options that pass policy, their costs, and the agent's notes on what the evidence supports. No recommendation of its own beyond that. Evidence: draft.
- Person, restructuring officer: decides. Chooses an option, asks for more information, or declines. Any write-off goes to finance for separate approval. Evidence: decision and reasons.
- Agent, depth 2: drafts the new agreement from approved templates for the chosen terms. Evidence: draft agreement.
- Agent, depth 3: applies the signed terms. After the borrower signs, it updates the servicing system to exactly the approved terms. Evidence: change log matching the approved terms.
| Step | The agent does | Depth | Stays with a person |
|---|---|---|---|
| Read loan | Gathers terms, history, security | 1 | Nothing |
| Borrower position | Completes the assessment | 2 | Nothing |
| Model options | Calculates each option's effects | 1 | Nothing |
| Policy check | Tests options against limits | 1 | Nothing |
| Proposal | Drafts the case for decision | 2 | Nothing yet |
| Decide | Nothing | none | Restructuring officer; finance for write-offs |
| Agreement | Drafts the new terms | 2 | Officer approves; borrower signs |
| Apply | Updates the loan to signed terms | 3 | Any change beyond the signed terms |
Which controls matter, and what evidence do they leave?
Every option shown with full cost. The borrower and the officer see total cost, not just the new monthly payment. Evidence: modelled costs in the proposal.
No steering. The agent presents all policy-compliant options in the same way, not only the one most profitable to the lender. Evidence: proposals list every passing option.
Write-offs separate. Forgiving debt is its own decision with its own approver; see whether an AI agent can write off a loan. Evidence: finance approval linked to any write-off element.
Apply only what was signed. The platform compares the servicing change with the signed agreement. Evidence: verdict citing the agreement version.
Time to consider. The proposal goes to the borrower with a reasonable period to think and to seek independent advice. Evidence: date sent and date signed.
Classification by a person. Marking the loan as forborne or restructured affects reporting and provisions. Evidence: classification change by a named person.
Repeat restructures flagged. A loan restructured again and again may be hiding a problem. Evidence: count in the policy check.
What should you measure?
- Restructured loans that perform to the new terms, and those that fall back into arrears.
- Time from request to decision.
- Officer changes to modelled figures. Frequent corrections point to a modelling problem.
- Options presented per case. One option every time suggests steering.
- Complaints about restructuring outcomes.
- Time between restructures on the same loan, which shows whether the first one was realistic.
Where does it usually go wrong?
Capitalised arrears are modelled wrongly. Interest on the new, larger balance is missed, and the borrower pays more than the proposal said.
Restructuring hides arrears. Loans are restructured to look current without a realistic plan. The repeat-restructure flag and officer judgement guard against this.
Short-term help is overused. A temporary problem is met with a permanent restructure, or a permanent one with a holiday. Match the tool to the problem; holidays are covered in handling loan payment holiday requests, and overdrafts, which are often part of the same picture, in handling overdraft requests.
The agreement drifts from the decision. A template fills in a slightly different term. Compare before signature.
Business borrowers are treated like consumers. A business restructure involves security, covenants and sometimes guarantors. Give it its own capability and evidence list.
Questions people ask
Can the agent tell the borrower which option is best?
It can explain each option's effect clearly and answer questions. Choosing on the borrower's behalf, or presenting one option as the answer, moves into advice and steering.
What if the borrower cannot afford any option?
The case goes to the officer with that finding. Other routes, such as forbearance, referral to debt advice or a settlement, are judgements for a person.
Does restructuring require a new credit check?
That depends on your policy and the nature of the change. If a search is needed, it follows the same consent and release rules as at origination.