(Photo: Shutterstock)
The COVID-19 crisis has had a significant impact on the financial services industry. Some of the effects will be short-term, but a new report from Moody's identifies key long-term effects.
"We expect there will be far-reaching longer-term effects that will fundamentally reshape many aspects of the macroeconomy, business life and consumer behavior," says Stephen Tu, Vice President – Senior Credit Officer at Moody's Investors Service and author of the report. "Identifying the long-lasting impact of this experience will be paramount for credit analysis."
Moody's report identifies three key long-term impacts resulting from the COVID-19 crisis: 1) the expected recession will compel banks to maintain low interest rates for years to come; 2) an accelerated migration to digital processes and service, by both businesses and consumers; and 3) a shift toward social corporate strategies.
1. Low interest rates
Lower, or even negative, interest rates will remain for the duration of the overall financial crisis that most of the world is facing, which will erode profitability for banks that don't borrow on the wholesale markets. "Banks that predominantly finance their lending with customer deposits rather than borrowing on wholesale markets will see profitability eroded by persistently lower interest rates," Tu says.
2. Digital services
Sending most of the country's white collar workers home to work remotely has caused a large-scale shift to digital services and a rethinking of old business habits, the report finds. "The sudden and extreme experience of the pandemic is proving to be a catalyst where old habits are suspended, allowing consumers to experience new digital ways of accomplishing trade and commerce," Tu says.
Continue Reading for Free
Register and gain access to:
- Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
