BAILOUT, CREDIT RISKS AND TECHNOLOGY - HOW WILL THE BANKING INDUSTRY SURVIVE COVID-19?

Like every other industry in the world right now, our banking industry is reeling under the effect of the Covid-19 pandemic too. To be sure, I believe the global financial industry is in a much better position to brace this impact than it was in 2008 in the wake of the global financial crisis.

- Abhishek Rungta

Several bankers around us are anticipating a liquidity crunch in the aftermath of the pandemic. This, in turn, will get passed to the general population in terms of pay-cuts, delayed salaries, etc.

Instead of worrying about the impending dent that this may cause to the world economy, financial institutions need to innovate to manage this crisis and minimize the losses for the economy.

A liquidity crisis is not the only thing that is keeping the industry veterans up at night. Will there be a paradigm shift in the way the global industry operates soon? No one has a clear answer but I am sure some of these ideas are here to stay.

The Bailout

Not only will the immediate impact from the pandemic be substantial but experts are unanimously forecasting an economic downturn that is bound to follow.

To lessen the economic pressure on financial institutions faced with the Coronavirus adversity, governments all over are coming to the rescue with the help of aid programs.

Generous packages are being rolled out to bail out the industry in its moment of stress.

Germany has announced an aid package that amounts to 822 billion Euros - about 26 percent of the country's annual GDP.

What's more, the German government has already committed to more financial assistance if required.

The UK Treasury has announced a package to the tune of 330 billion Euros or about 15 percent of its annual GDP. The Czech Republic has pledged to guarantee loans to businesses that would account for 19 percent of its GDP.

Unfortunately, the aid provides temporary relief and that too for an indefinite period. This is a risk that is borne by the governments.