{"id":616,"date":"2020-07-29T19:36:53","date_gmt":"2020-07-29T19:36:53","guid":{"rendered":"https:\/\/businessner.com\/?p=616"},"modified":"2024-01-13T10:22:45","modified_gmt":"2024-01-13T10:22:45","slug":"leadership-in-the-time-of-coronavirus-covid-19-response-and-implications-for-banks","status":"publish","type":"post","link":"https:\/\/businessner.com\/leadership-in-the-time-of-coronavirus-covid-19-response-and-implications-for-banks\/","title":{"rendered":"Leadership In The Time Of Coronavirus: COVID-19 Response And Implications For Banks"},"content":{"rendered":"

The devastating impact of the Covid-19 crisis on every-day life and health has carried a thoroughly disruptive economic fallout. Economists cannot revise their projections of growth down fast enough. Analysts anticipate that the total cost of the pandemic will have accumulated to a staggering $8.8 trillion<\/a> by the end of 2020, which is almost nine percent of the global GDP.<\/p>\n

An overwhelming number of measures have been developed to cushion the Coronavirus blow to the global economy. Yet, the path ahead remains precarious, thanks to epidemiological uncertainty and unpredictable shock to both supply and demand.<\/p>\n

Meanwhile, \u201cpre-existing conditions\u201d in the economy that had long remained hidden are coming to light as major challenges. Organizations in virtually all industries are painfully accepting the reality that\u00a0business\u00a0will not return to normalcy any time soon. The remote and flexible work model has gradually become the new normal, boosting the number of people who choose to become self-employed freelancers and thus, the need for\u00a0fixed price accountants<\/a>\u00a0and bookkeeping professionals.<\/p>\n

<\/a>The Covid-19 Impact on Banks<\/h1>\n

As Covid-19 continues to wreak havoc, banks undoubtedly have their hands full. Businesses are facing stagnated sales and declining profits, and individual borrowers are losing jobs. Consequently, banking customers are increasingly seeking financial relief.<\/p>\n

Even as the world looks to banks for help, however, these institutions are not in the best position to be philanthropic. They too have to deal with the strained earnings and the rapid changes to banking habits that Covid-19 has brought.<\/p>\n

<\/a>Strained Earnings<\/h2>\n

The outlook of the financial market was positive during the first several weeks of the year, but things quickly took a tumble. When market stress started in February, bank stock prices plummeted. In March, a severe stock sell-off set in, and banks became the worst performers in the market<\/a>. By the end of the quarter, banks\u2019 stock prices were lower than those of some of the hardest-hit sectors. Price-to-book ratios fell to below one<\/a> across banks in Europe and the U.S.<\/p>\n

Banks have suffered immensely, not just relative to other sectors, but also when you compare this year\u2019s pandemic to previous crises. Despite the recent improvement, the decline of stock prices is on par with the one that followed the 2008 collapse of Lehman Brothers<\/a>. Long-term rating outlooks are deteriorating dramatically, and industry players are expressing concerns over the Covid-19 impact on bank earnings.<\/p>\n

Meanwhile, indicators of banks\u2019 funding costs have risen exponentially. In March, spreads on bank bond indices grew substantially across various maturities and currencies. Even after some decisive policy actions<\/a> from the Federal Reserve and the European Central Bank, funding conditions remained tight all through May, with most spreads ranging around twice as wide as they were in February.<\/p>\n

<\/a>Challenged banking habits<\/h2>\n

The rapid spread of the Coronavirus got many institutions scrambling to reinvent their workspaces to minimize in-person banking and physical exchanges. When the World Health Organization advised against contact payment methods in March, the Bank of Korea responded by quarantining bills coming from local banks<\/a>. Similarly, the U.S. Federal Reserve resolved to isolate banknotes from Asia<\/a> for up to 10 days. In many parts of the world, disinfecting and isolating physical notes became commonplace.<\/p>\n

Of course, Covid-19 has more carriers than just paper money. Banks, customers, and regulators have been weighing the risks of face-to-face transactions. Official recommendations from the CDC advise individuals to keep at least six feet away from visibly ailing people, a feat that could be impossible at physical branches.<\/p>\n

Banks are therefore feeling the pressure to think outside the box and embrace new technologies and processes. Digital banking now seems like the most reasonable way to complete transactions.<\/p>\n

In April, the Federal Financial Institutions Examination Council advised banks<\/a> in the U.S. to test their system\u2019s capacity to handle the anticipated influx of digital banking demands.<\/p>\n

At a time when reducing operating costs is the top priority for all business organizations, institutions without the framework for remote banking are grappling with the fact that they must invest to satisfy their clients.<\/p>\n

<\/a>How Can Banks Survive The Covid-19 Scourge?<\/h1>\n

If you have any interest in the banking sector, you have probably been wondering what banks can do, both in the short and long term, to wade through the Coronavirus storm and play their part in sustaining the global economy.<\/p>\n

Banks around the world are expected to be the stabilizing pillar for their customers, employees and economies. Essential services like deposits and withdrawals, credit extensions, and payment facilitation must not be disrupted.<\/p>\n

Concurrently, banks must reassure their customers and retain their trust during this uncertain period.<\/p>\n

Read on for the critical steps that banks must take to stay afloat and secure their post-Coronavirus future.<\/p>\n

<\/a>Stress-test existing systems<\/h2>\n

It is difficult to pin-point the exact financial impact of the Covid-19 crisis. Nonetheless, based on current indicators, the banking industry can safely anticipate some trends over the course of the year.<\/p>\n