By Ajay Katara is a Domain Consultant with the Banking Industry Advisory Group at Tata Consultancy Services (TCS).
The world currently is reeling under the pressure of an unrelenting pandemic which is caused by COVID 19, the impact of this is already being felt across all sectors and has resulted in Global Lockdowns, increased joblessness and downward revised growth projections for countries globally. The impact on the Banking sector is no different either, with an economic lockdown enforced Banks are having to brace themselves for reduced interest rates, increased default rates and reduced recoveries.
A high-level view of the impact on the Banking system is provided below
A decade ago, Banking and Financial Industry witnessed a similar unprecedented Financial crisis and as an outcome of that there were a slew of regulations which were introduced by regulators worldwide to monitor and contain the impacts of such crisis. Regulations like stress testing have helped banks to brace up for such scenarios to some extent but given the nature of this pandemic the stress test scenarios and models will need to be enhanced to understand the impact of COVID19 scenario on the Banking Book….
