Banking Sector The impact of COVID-19 Question 2022

Banking Sector
The impact of COVID-19
Student Details
2020

BANKING SECTOR 1
Table of Contents
Question a) Given that banks are suspending loan repayments what impact would these
strategies have on the risks facing the bank...............................................................................2
Question b) Banks screen and monitor borrowers to minimize adverse selection and moral
hazard. How can banks ensure that their screening and monitoring will be effective given the
coronavirus crisis?......................................................................................................................3
Question c) In selected countries credit cards are attracting special treatment. What
characteristics make credit cards unique?..................................................................................4
References..................................................................................................................................5

BANKING SECTOR 2
Question a) Given that banks are suspending loan repayments what impact would these
strategies have on the risks facing the bank.
The banks are suspending the repayment of the loan amount s, in order to support the
SMEs and the entrepreneurs, but such practices would impact the banking sector all over the
world, as due to the pandemic outbreak, the businesses are not being operated, and when they
will continue to operate within the industry, they will run dry of cash, and will not have
enough capacity to repay their existing loan amounts, as a result, the banking sector is
expected to be impacted for over a long period even after the situation gets stabilize and the
companies start operating within the industry. The banks will be required to focus on cutting
interest rates so that after the pandemic the banks can attract the customer within the industry,
also the bank capital ratios are required to be adjusted so that the banks have enough capital
and be in the position that they can operate within the economy (Jha, 2020).
As the banks are focusing on providing relief to the citizens in regarding the financial
transactions due to the pandemic but will have to face tough times in managing the situation
after the situation. As due to the suspension of the loan repayments, the banks will face a
reduction in the cash flow and will impact the liquidity of the sector. The suspension of the
loan repayment within the economy due to COVID-19 would result in impacting the business
operations of the SMEs and as a result, they would not be able to repay their loans initially
after the situation gets normal, and such will impact the banking sectors and the major banks
that are operating in the economies such as Europe, Italy or US (South, Avesani, & Brevigli,
2020).