Coronavirus crisis is a major challenge for the financial sector
So far, the financial sector has been able to resist the issues caused by the coronavirus. Banks are still resilient and continue to fulfil their role as lenders. However, the second corona wave has created more uncertainty. It is important that the current economic crisis does not spill over to the financial sector. In order to limit the damage, the DNB is maintaining adjusted buffer requirements, so Banks can continue to maintain lending to businesses and households.
Second wave brings uncertainty
Although the second wave of coronavirus has passed its peak, it remains to be seen how banks will be affected by rising business bankruptcies and credit losses. Banks are already taking into account that loans to companies will be difficult to repay in the future and as such the delays in repayments.
Prevent financial crisis
Impact on businesses and households, from the virus, is being limited as much as possible by the government’s support measures and schemes. It is important that the economic crisis does not spill over into the financial sector. For this reason, the DNB gave extra support in March to maintain lending and absorb as many losses as possible. The difference between the current coronavirus crisis and the credit crisis in 2008/2009, is that the cause now lies outside the financial sector and high buffers will allow banks to maintain lending levels.
Despite banks being able to maintain lending, their profitability is still affected by credit losses, higher financing costs and falling revenues. This has also had an effect on insurers and pension funds, which are financially subject to the fall of their investment prices.
The pandemic stress test, conducted by the DNB, maps out the vulnerabilities of the Dutch banking sector; should severe economic scenarios occur. This test has shown that the longer it takes for the economy to recover, the more serious it can become for Dutch banks. Therefore, we hope that the consequences of the second coronavirus wave will not be too substantial.
Interest rates are currently at a historic low. Meaning, that it is currently cheaper to borrow money.
This should convince companies to invest and households to continue to consume in the medium term, whilst incentivising economic growth through increased investment and spending. However, it remains uncertain to what extent the consequences of the second wave of coronavirus will tangibly impact economic growth.
With the current low interest rates, it is important that loan providers can easily be found by companies and individuals. Affiliate marketing is the best tool to enable this, with our specialists making sure you have a prominent presence online. Please contact your Account Manager to discuss the options available to you.