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Tribune News Network
Doha
Most banking systems across the world are well-placed to absorb the economic shocks triggered by the coronavirus, Moody’s Investors Service has said in its recent report.
“In contrast to the financial crisis, the banking system is more likely to act as a shock absorber rather than an amplifier,” Moody’s Investors Service Banking Managing Director Nick Hill said.
“But a second wave of the pandemic that leads to new lockdowns and economic turmoil could cause more lasting damage to banks’ credit profiles,” Hill said.
Moody’s said in its report that after ten years of broadly benign economic conditions, and relentless regulatory pressure to reinforce balance sheets, most banking systems are in good shape and can withstand the inevitable rise in bad debts over the coming months.
“In addition, actions taken by central banks and governments to soften the virus impact have slowed the rise in asset risk and underpinned liquidity and funding,” the global rating agency said in its bullish outlook on global banking.
Banks with more diversified business models - notably those with capital markets activities - will also prove more robust than those focused on more susceptible activities like lending to small businesses and corporates, said Moody’s.
However, projecting a different scenario of the global banking industry, S&P Global Ratings said recovery of the sector would stretch to 2023 and beyond.
“COVID-19 and the oil price shock of 2020 are taking a heavy toll on global banks. We anticipate it will be difficult for the financial strength ratings on financial institutions to return to pre-crisis levels. We don’t expect the world’s largest banking sectors, including more than half of G20’s, to recover to pre-Covid-19 levels until 2023, or beyond,” said S&P, which has taken 335 negative rating actions globally since the outbreak began.
“The hit on financial institutions globally has been unambiguously negative,” said S&P Global Ratings credit analyst Gavin Gunning.
The rating firm said recovery to pre-Covid-19 levels would unlikely come before end-2022 even for less-affected banking jurisdictions. These jurisdictions include China, Canada, Singapore, Hong Kong, South Korea, and Saudi Arabia.
Doha
Most banking systems across the world are well-placed to absorb the economic shocks triggered by the coronavirus, Moody’s Investors Service has said in its recent report.
“In contrast to the financial crisis, the banking system is more likely to act as a shock absorber rather than an amplifier,” Moody’s Investors Service Banking Managing Director Nick Hill said.
“But a second wave of the pandemic that leads to new lockdowns and economic turmoil could cause more lasting damage to banks’ credit profiles,” Hill said.
Moody’s said in its report that after ten years of broadly benign economic conditions, and relentless regulatory pressure to reinforce balance sheets, most banking systems are in good shape and can withstand the inevitable rise in bad debts over the coming months.
“In addition, actions taken by central banks and governments to soften the virus impact have slowed the rise in asset risk and underpinned liquidity and funding,” the global rating agency said in its bullish outlook on global banking.
Banks with more diversified business models - notably those with capital markets activities - will also prove more robust than those focused on more susceptible activities like lending to small businesses and corporates, said Moody’s.
However, projecting a different scenario of the global banking industry, S&P Global Ratings said recovery of the sector would stretch to 2023 and beyond.
“COVID-19 and the oil price shock of 2020 are taking a heavy toll on global banks. We anticipate it will be difficult for the financial strength ratings on financial institutions to return to pre-crisis levels. We don’t expect the world’s largest banking sectors, including more than half of G20’s, to recover to pre-Covid-19 levels until 2023, or beyond,” said S&P, which has taken 335 negative rating actions globally since the outbreak began.
“The hit on financial institutions globally has been unambiguously negative,” said S&P Global Ratings credit analyst Gavin Gunning.
The rating firm said recovery to pre-Covid-19 levels would unlikely come before end-2022 even for less-affected banking jurisdictions. These jurisdictions include China, Canada, Singapore, Hong Kong, South Korea, and Saudi Arabia.
