Spain and the United Kingdom are the two countries most at risk of a bank downturnAccording to a recent report by the Boston Consulting Group.
“Although the capital and preventive liquidity ratios imposed after the financial crisis provided banks with very important protection during the epidemic, That cushion could shrink in the coming months if the economic outlook worsens. This is especially true for banks in countries where tourism, real estate, or transportation make up a large part of the industrial fabric. This is the case in the United Kingdom and Spain, for example, “as stated in the document prepared by the Chancellor.
However These types of risks are higher in Spain and the United KingdomThis is a problem faced by the entire European financial sector, according to the BCG.
The bank is more resistant than it was in 2008
A problem that cannot be ignored, no matter how much the bank showed greater resistance in the current crisis compared to the previous crisis, as it was at the origin of everything that happened.
“Banks have entered the epidemic better than most companies. Financial reforms that followed the 2007 financial crisis ensured the accumulation of strong capital and liquidity reserves in most institutions. But as the epidemic enters its second year, many banks will have to prepare for the high rates of delinquency and the effect this will have on their balance sheets, “the consultant says.
Delinquency in the banking sector is on the rise
“Next year will see more bankruptcies, as the postponements that saved some companies from bankruptcy expire, and the financial costs push other companies to the brink,” BCG adds.
Actually, Bankruptcy procedures opened in 2020 have decreased compared to 2019 thanks to public aid provided globally (In the form of credits from ICO or ERTES, in the case of Spain), but these measures masked the seriousness of the situation and with the expiration date “the real damage will become more apparent”.
Therefore, BCG experts concluded: “We expect delinquency numbers to increase in the coming months, given the disruption caused by the pandemic and the time it takes for the full effects of the Covid-19 crisis to be reflected in the companies’ financial statements, ”reads the document.
Banks have the support of regulators
In favor of banks, on the other hand, popular consultants see this The European Central Bank will maintain its support for the old continent’s entities to avoid trouble.
Aware of the risks facing banks and the economy as a whole, regulators are likely to remain flexible. Most will continue to allow banks to use their own capital and stores of liquidity and will be flexible with provisions relating to provisions, the firm’s analysts write.
With all this in mind, the BCG recommends that affluent entities use the crisis as an opportunity to position themselves as a reliable partner for their clients, whether large (helping them stabilize their cash flows, for example) and small (with loan refinancing).
To take advantage of these opportunities, banks will need to strengthen their risk management. By ensuring their own stability, they will be able to help the community in the broadest sense to restore its stability, “as stated in the document.