Over the past few years, financial institutions have been utilizing a credit management strategy when dealing with borrowers who could not meet their loan obligations. That is: delay the inevitable in hopes that the tide will change.

In practice, this means lenders extended the maturities or modified other monetary and non-monetary terms of certain loans with the hope that when the economy rebounded, borrowers would once again be able to repay them as the underlying collateral, in many cases commercial and residential real estate, regained value. It also helped to keep souring loans classified as performing, thereby decreasing the capital set -asides for reserves.

Given these statistics, restructuring loans through extensions may have made sense when the length of the crisis was uncertain and economic recovery was arguable. However, today this restructuring strategy-extend and pretend-is no longer in vogue.