COVID-19 and Bank Resilience: Where Do We Stand?

Ikeda, Yuuki; Kerry, Will; Lewrick, Ulf; Schmieder, Christian

doi:10.2139/ssrn.3981723

Cited by 8 publications

(5 citation statements)

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“…Based on this, moratoria has arguably cemented its place as a regulatory tool with significant application for future periods of financial stress. Ikeda et al (2021) reported similar findings in advanced economies, but it remains to be seen if crisis has been averted in the ECCU. Stress testing allows for us to examine the impact, should NPL increases become more severe.…”

Section: Findings and Resultsmentioning

confidence: 62%

“…As the global focus on addressing the vulnerabilities of small island developing states (SIDS) like those of the ECCU intensifies, understanding the impact of the pandemic on FIs in this context is instructive. Regrettably, the burgeoning literature has primarily focused on the developed country experience (Ikeda et al , 2021; Stiller and Zink, 2020; Yarovaya et al , 2020). Where studies claim to incorporate investigations of “Latin America and the Caribbean,” our review has found that at best, they include only larger Caribbean nations like Jamaica and Trinidad and Tobago, but none of the SIDS of the Eastern Caribbean (Elnahass et al , 2021; Demirgüç-Kunt et al , 2021).…”

Section: Introductionmentioning

confidence: 99%

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COVID-19 and financial institution stability: stress testing the Eastern Caribbean currency union

DaSouza

Martin²,

Ábrahám³

et al. 2023

JFRC

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Purpose This paper aims to simulate the potential impact of increasing non-performing loans (NPLs) on capital adequacy, interest income and firm value of banks and credit unions in the Eastern Caribbean Currency Union (ECCU) using stress tests. Design/methodology/approach A financial stress testing model was deployed at the levels of individual financial intermediary (FI), sectoral loan portfolio composition, individual member country, and the ECCU collectively, to investigate the impact of NPL shocks on FI stability. Findings The authors find that shocks impact the capital adequacy of banks less than that of credit unions, but that firm value of banks is more susceptible to increases in NPLs. Interest income responses to NPL shocks were linked to credit exposure from the tourism sector, which also reduced capital adequacy more than other economic sectors. Findings show that while the COVID-19 pandemic occasioned some increase in NPLs, the magnitude of impact was significantly mitigated by pro-stability policies including loan repayment moratoria and restructuring, guidance on the distribution of profits and deleveraging by financial institutions leading up to 2020. Originality/value The paper is among the first to use stress testing on the Caribbean in response to the COVID-19 pandemic. Past studies which have used stress test models in the region have not explicitly investigated the impact of credit shocks on risk-weighted assets or interest income as done herein, nor do they include credit unions in the modeling. The results offer novel evaluations as well as implications for FIs in other developing economies, especially those that share a comparable financial and economic architecture.

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Section: Findings and Resultsmentioning

confidence: 62%

Section: Introductionmentioning

confidence: 99%

COVID-19 and financial institution stability: stress testing the Eastern Caribbean currency union

DaSouza

Martin²,

Ábrahám³

et al. 2023

JFRC

View full text Add to dashboard Cite

show abstract

“…Financial and banking industries faced business uncertainty due to the COVID-19 pandemic (Wongsansukcharoen, 2022). The COVID-19 pandemic influenced "an unprecedented stop in global economic activity but has represented an unusual crisis for the banking system", due to the modest bank losses as the lending experienced strong (Ikeda et al, 2021). Moreover, the introduction of epidemiological measures globally "led to a sudden stagnation of economic and social activities and consequently, a sharp decline in the gross domestic product" (Fotova Čiković et al, 2022).…”

Section: Covid-19 and The Banking Industrymentioning

confidence: 99%

Banking Marketing Practices During the Covid-19 Pandemic: A Systematic Literature Review

Čiković¹

2022

Balkans JETSS

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The emergence of the COVID-19 pandemic in early 2020 has left a mark in every industry and every sector globally. Its impact has been largely researched, measured, and evaluated. Current banking literature mainly focuses on the impact of COVID-19 on banks’ performance, efficiency, or profitability. However, studies on the impact of COVID-19 on banking marketing are limited. Therefore, this systematic review has the objective to fill in this gap and investigate the impact of COVID-19 on banking marketing practices. A systematic search of the online Scopus scientific database has been conducted, with no restrictions to language, date of publication, or study design. The keywords „BANK“, „MARKETING“ and „COVID-19“ have led to 20 papers published in Scopus-indexed journals. A total of 9 academic literature articles regarding banking marketing during the COVID-19 pandemic were identified and analyzed using the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) principles. The findings of a total of 9 papers are presented in a narrative synthesis. The review aims to gain new insights into the impact of COVID-19 on the banking industry and especially on banking marketing. The main goal of this paper is to identify all the relevant published studies in this area thus far, as well as to present and analyze the findings regarding the impact of COVID-19 on banking marketing practices. Finally, specific literature gaps are identified, and suggestions and guidelines for future work are provided. However, there is a need for further studies at a later stage to understand the overall effect the COVID-19 pandemic had on banking marketing.

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“…The study also points out that stress tests, being forward-looking assessments of banks' resilience, represent a valuable toolkit to assess banks' conditions even under the Covid-19 pandemic circumstances. As the Covid-19 pandemic impact is better understood, policymakers can achieve the necessary balance between keeping banks safe and sound and ensuring an adequate flow of credit to the real economy (Baudino, 2020;Ikeda et al, 2021). However, adjusting such complex scenarios to use as a regular stress test is quite complicated.…”

Section: Appendixmentioning

confidence: 99%

The Safety Threshold of Vietnam's Banks During Covid-19

Xuan,

Nguyen,

Tin

et al. 2021

J. Keuang. dan Perbank.

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Using the stress test, we measured the Comercial banks' withstand under pressure caused by the outbreak of COVID-19, which led to a freeze of the real estate market, a fall of the stock market, and an increase of non-performing loans (NPLs). The findings show positive and hopeful signs. Even though the real estate and stock markets fell by 40%, resulting in a significant devaluation of the banks' loan collaterals, banks do not need to supplement provisions for credit risk. The high number of NPLs, which lead to increased provisioning, erodes net earnings, reducing the capital adequacy ratio (CAR). Banks can still meet both the 9% minimum CAR requirement and the 3% maximum NPL requirement. The study also identifies the maximum safety threshold of the Vietnamese banking system, which averaged up to a 50% increase in NPLs. Two of the country's top 10 banks are even able to maintain a CAR greater than 9% and an NPL ratio below 3%, although NPLs increase to 450% and 215% compared to these before the shock, respectively.JEL: E50, G21

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COVID-19 and Bank Resilience: Where Do We Stand?

Cited by 8 publications

References 0 publications

COVID-19 and financial institution stability: stress testing the Eastern Caribbean currency union

COVID-19 and financial institution stability: stress testing the Eastern Caribbean currency union

Banking Marketing Practices During the Covid-19 Pandemic: A Systematic Literature Review

The Safety Threshold of Vietnam's Banks During Covid-19

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