BGP7730: Impact of Global Pandemic on Banking Industry Analysis Report

This research report, prepared for a Business Research Project, investigates the profound impact of the COVID-19 pandemic on the banking industry, with a specific focus on the challenges faced by major institutions like Westpac and Commonwealth Bank. The report begins with an executive summary, table of contents, and introduction outlining the research rationale, objectives, and implications. A comprehensive literature review explores the influence of COVID-19 on business operations, particularly within the banking sector, examining topics such as the rise in non-performing assets, economic slowdown, and the strategic responses adopted by banks. The research objectives include understanding the pandemic's effects, assessing the responses of Westpac and Commonwealth, and offering recommendations for crisis management. The report analyzes the impact on the banking industry and the strategies adopted by Westpac and Commonwealth to mitigate the negative effects of the pandemic. The study's findings provide recommendations for banks and provide essential knowledge to students and teachers on how to navigate similar crises. The report concludes by offering insights into the pandemic's impact on the financial positioning of banks and the future of banking operations.

Running head: IMPACT OF GLOBAL PANDEMIC ON THE BANKING INDUSTRY
IMPACT OF GLOBAL PANDEMIC ON THE BANKING INDUSTRY
Name of the Student
Name of the University
Author Note

1IMPACT OF GLOBAL PANDEMIC ON THE BANKING INDUSTRY
Executive Summary
The Covid 19 global pandemic poses a serious threat on the world economy and in association with this,
it can be critically mentioned that, the global pandemic had critically affected the banking industry as
well. Hence, this report proposes a study topic which assesses the associated challenges which are being
faced by the banking organizations such as the Westpac and the Commonwealth. This proposal proposes
a study which shall find the barriers faced by the banks, the manner in which they are facing the
challenges and additionally associated considerations and recommendations.

2IMPACT OF GLOBAL PANDEMIC ON THE BANKING INDUSTRY
Table of Contents
Topic of research:............................................................................................................................3
Introduction......................................................................................................................................3
Research rationale............................................................................................................................3
Implications of the research.............................................................................................................4
Research objectives.........................................................................................................................4
Literature review..............................................................................................................................5

3IMPACT OF GLOBAL PANDEMIC ON THE BANKING INDUSTRY
Topic of research: ANALYSIS OF CHALLENGES FACE BY BANKS DURING COVID - 19
COMMON WEALTH BANK VS WESTPAC
Introduction
The Covid 19 as a pandemic can be essentially described to be the most serious challenge
to the different banking and financial institutions in nearly 100 years. As the economic fallout
emancipates the daily economic activities, the retail banks find themselves struggling with
greater priorities which require concrete steps to reposition themselves while thinking about the
future as well (Zetzsche et al. 2020). The banks have been working hard to ensure that they can
keep their distribution channels open and despite the social distancing advice, they undertake
associated measures to see to it that, they can manage the customer needs and expectations.
Additionally the banking organizations are also required to ensure that they are being able to
manage the near zero interest rates and reduce the pressure on the customers. Moreover, the
strategic initiatives and the associated market forces are also tracked accordingly. The associated
challenges which are generally faced by the banks can be taken to be the focus on the business
continuity planning and issues for survival. Additionally, it has to be critically assessed that they
would be required to undertake elaborate steps to ensure that the trimming of the costs can be
done easily and the revenue can be optimized. Moreover, they would also be required to plot a
COVID 19 strategy. Hence, the study aims to understand the manner in which the Westpac and
the Commonwealth bank have been dealing with the associated considerations by ensuring
successful operations and managing the pressure.
Research rationale
The reason why conducting this research can be critical is because, not enough literature
is available in this domain (Zetzsche et al. 2020). Although the phenomenon of the Covid 19 is
new but there have been certain articles which have assessed the manner in which the other
industries have been affected but no industry seeks to identify the influence of the Covid 19 on
the banks. Therefore, through the study the impact of the pandemic will be assessed on the
commonwealth and the Westpac. A comparison would be made into the manner in which these

4IMPACT OF GLOBAL PANDEMIC ON THE BANKING INDUSTRY
enterprises have been managing the associated operations. Moreover, the study will effectively
contribute to the research gap as present in this domain.
Implications of the research
The implications of the research will be as follows:
 Recommendations for the crisis management can be provided to the banks
 It will give adequate knowledge to the banking students and the teachers on the manner
in which this pandemic has to be dealt with.
 Moreover, the effect of the pandemic on the financial positioning of the banks will be
assessed critically.
Research objectives
 The objectives of the study are as follow:
 To understand the concept of Covid 19 and its associated influence on the business
activities
 To examine how the Covid 19 has affected the banking industry
 To assess the way in which the banking enterprises have been dealing with the associated
operations
 To compare the responses of the banks-Westpac and Commonwealth.
 To provide recommendations based on which Westpac and Commonwealth will be able
to improve the operations.

5IMPACT OF GLOBAL PANDEMIC ON THE BANKING INDUSTRY
Literature review
Covid 19
The Covid 19 can be taken to be pneumonia of an unknown cause which was first
detected in Wuhan, China. The disease was first reported to the World Health office country
office in China as on 31st December 2019 (Zetzsche et al. 2020). The World Health organization,
the WHO is working 24/7 to analyze the associated data, provide advice, coordinated with the
partners, assist various countries to prepare, increasing the supplies as well as manage the expert
networks.
In line with this, it is effective to mention that the outbreak of the virus was declared a
Public Health emergency as of 30 January 2020. The Corona Virus disease 2019 can be defined
as an illness which has been caused by the novel coronavirus and is now being called the severe
acute respiratory syndrome coronavirus 2. The reason why this name was chosen is to ensure that
the stigmatizing the virus`s origins in terms of the population, geographic, animal associations.
Influence of Covid 19 on business
The coronavirus outbreak is being deemed as a human tragedy which has impacted
thousands of people around the globe. In addition to affecting the health of the different
individuals, the virus has also affected the global economy. In assistance with this, the Covid 19
has been able to provide the different business leaders with a perspective on the evolving
situation and the implications for the associated companies (Wenham, Smith and Morgan
2020). In consideration with this, Australia has also been critically affected as the implications of
the scenario are very poor. In addition to this, the scenario has been evolving and the outbreak
has led to the new norms of social distancing which has disrupted the associated operations as
well. The different enterprises as present in the hospitality industry have stopped trading
altogether whereas some of them have reduced staff by 70% to ensure effective operations but
securing the health of the employees and the customers as well.

6IMPACT OF GLOBAL PANDEMIC ON THE BANKING INDUSTRY
The Covid 19 pandemic has forced a staggering 70% of the associated businesses in the
hospitality sector to reduce the hours of their staff and 43% of the staff has been required to sack
the workers or provide them with an unpaid leave. According to Wenham, Smith and Morgan
(2020), new data has been released which reflects that due to the Global pandemic, the
government`s tough social distancing restrictions which were allowed at the end of the 29th
March. The cash flows of the associated business enterprises have also been impacted critically.
Out of 5 businesses, 2 have mentioned that they have changed the mode in which the
businesses tend to perform their operations and have deferred their payments as well. In
association with this, it can be agreed that, the disruptions to the Australian workers can be
agreed to be very vast (Maital and BARZANI 2020). Half of the businesses as involved in the
businesses would be required to see to it that, they are making ample changes in their business
operations whereby they bring about some temporary as well as permanent changes to the
workforce and temporary reduce the working hours, the associated locations or have placed the
staff on a leave. According to Latham (2020), the Covid 19 does not discriminate and neither
should the government. In consideration of this, the assistance needs to be extended to all
workers. The Westpac economists have warned that the Australian gross domestic product would
contract by 8.5% in June followed by 0.5% contraction in September. Overall, the business is
expected to go down by 5% through the year 2020. The impact is assumed to be particularly
severe in New South Wales and in Victoria due to its heavy reliance on the international students
and the tourism. The New South Wales is expected to have a recession and its reliance on the
tourism will affect the operations.
According to Fernandes (2020), there shall be considerate changes in the healthcare
systems and social assistance sector workforce whereby 63% of the business will make changes
to the workforce because of the Covid 19. In association with this, 63% businesses have already
made changes to the workforce because of Covid 19 and include the 44% which comprises of the
reduced work hour staff hours and the rest of them have changed their location accordingly. In
line with this, 9% of the healthcare or social assistance businesses have temporarily increased
work hours. About 9% of healthcare or social assistance businesses said they had temporarily
increased work hours.

7IMPACT OF GLOBAL PANDEMIC ON THE BANKING INDUSTRY
Figure 1
(Source: ABS)
Influence of Covid 19 on banking operations
The various banking enterprises are expected to receive a spike in their non-performing
assets by a ratio of 1.9 percent and have reported a credit cost ration by 130 basis point in 2020.
In line with this, it can be adequately mentioned that the economic slowdown will influence all
operations critically. The Covid 19 crisis could add up to USD 300 billion to the credit costs. In
consideration with this, it can be mentioned that, the non-performing assets ratio of the banks are
expected to increase to a greater extent (Baldwin and Tomiura 2020). The financing conditions
way impact investors as well specially those who are risk averse and this is expected to hit the
bank credit. In consideration with this, when the banks are not exposed as the corporate sector
during the initial stage of the pandemic, the strain will be on the lenders could be profound. As
compared to other sectors, the Banks have faced comparatively less influences (De Vito and
Gomez 2020). Various businesses have started planning and in association with this, diverse
measures have been met with to meet with the Covid 19. These comprise of the liquidity
injections, targeted loans and the policy rate cuts. Hence, in association with this, it can be
agreed that the influence of the associated issues on the banks can be agreed to be very high and
all the sectors of the economy have been affected.

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9IMPACT OF GLOBAL PANDEMIC ON THE BANKING INDUSTRY
References
Baldwin, R. and Tomiura, E., 2020. Thinking ahead about the trade impact of COVID-19.
Economics in the Time of COVID-19, p.59.
De Vito, A. and Gomez, J.P., 2020. Estimating the COVID-19 Cash Crunch: Global Evidence
and Policy. Available at SSRN 3560612.
Fernandes, N., 2020. Economic effects of coronavirus outbreak (COVID-19) on the world
economy. Available at SSRN 3557504
Latham, L., 2020. COVID-19: Workers should not be made to mortgage our future. Green Left
Weekly, (1258), p.9.
Latham, L., 2020. Workers should not pay for COVID-19 crisis. Green Left Weekly, (1257), p.8
Maital, S. and BARZANI, E., 2020. The Global Economic Impact of COVID-19: A Summary of
Research. Samuel Neaman Institute for National Policy Research
Wenham, C., Smith, J. and Morgan, R., 2020. COVID-19: the gendered impacts of the
outbreak. The Lancet, 395(10227), pp.846-848.
Zetzsche, D.A., Anker-Sørensen, L., Consiglio, R. and Yeboah-Smith, M., 2020. The COVID-
19-Crisis and Company Law-Towards Virtual Shareholder Meetings. Available at SSRN
3576707