Banks and financials in front of coronavirus: reality changed?
By on The Capital
The classical banking world has already changed. For example, only in Hong Kong local bank offices were reduced by 25–50%. All around the world, banking institutions notice a significant or total fall of number of clients visiting bank offices. World specialists predict a crucial change in human behavior after the COVID epidemic. Especially if its world reign lasts long. According to social psychology, a significant number of financially active citizens might not return to their everyday habits, including regular visits to their local bank offices.
The COVID-19 situation shows once again the need for a traditional banking system change. This mortal disease has even shown the right way for them to take: the system digitalization. The path not all of the banks presumed to take until now.
And yet, central banks are still trying to retain their dominance by the measures they are urgently taking. All of this together. The Fed, the European Central Bank, the Bank of Japan, the Bank of England, the Bank of Canada and the Swiss National Bank will be acting in concert to improve the supply of liquidity markets denominated in United States dollars.
Moreover, the central banks and major banks are holding themselves out as heroes and saviors promising to mobilize all of their resources in order to maintain the ordinary efficient functioning of the market as far as of the credit system. The “fed funds” rate range has been recently reduced by 100 basis points to return between 0% and 0.25%. The Fed will also buy treasury bills and securitized mortgage loans (MBS) on the markets for at least $ 700 billion (about 625 billion euros) over the next few weeks. All of this to help the world economy to resist markets unexpected ups and downs, keep the prices at their ordinary rates, and preserve workplaces.
What is also illustrating a threat for world banking system, is that the US Central Bank called on lending institutions to tap into the hundreds of billions of dollars of capital and liquidity held in reserve since the financial crisis to increase their lending volumes for businesses and households.
However, it still seems that, for example, European banks are profiting a lot from the epidemic situation and from the European Central Bank (ECB) rescue plan. Its recently announced measures aim to reduce the cost of refinancing establishments and to loosen the regulatory noose weighing on the European sector.
So would traditional banks survive world pandemic?
People all around the world remain cautious as the virus is winning over more and more regions. They are so thrilled by the COVID-19 almighty that are concerned about the danger that cash can bring today. Countries like China and South Korea have chosen to disinfect their banknotes to limit the spread of the Covid-19 epidemic. They are thus turning towards digital and neobanking solutions as they still need to perform their everyday financial activities. They enable all types of financial operations to be realized without any physical and social contact needed. The ones supporting digital currencies and providing different investment solutions are also gaining popularity as they help people save and augment their savings in these turbulent times.
Often these are the hardest times that teach humanity the most important lessons and push its development forward. Massive isolation and market violent fall indicates that the traditional banking system is too far away from the world itself. The world of high technologies, constantly increasing mobility, the world that is at the same time very strong and very vulnerable in its progress.
COVID-19 has already taught us one of the most significant lessons of the new decade: disruptive technologies should be massively adopted much faster than they are now as their disruptive nature predicts world changes and future world needs. Thus neobanking projects from all around the world are now contributing to a faster decrease of the coronavirus pandemic without decreasing general comfort and activity limitation even in the general situation of deprivation.
