​​​​​​​Banking expert: International banks unlikely to hold up long against Corona aftermath

Reportaj Summay

​​​​​​​Banking expert: International banks unlikely to hold up long against Corona aftermath
7 April 2020   01:36

The former governor of the Central Bank of Yemen and the banking expert Rasheed Abdul Karim Al-Ansi said that despite the important role that banks play in overcoming the Corona crisis, their resilience depends on the length of time crisis, noting that some banks may not last long.

The precautionary measures against the coronavirus outbreak worldwide has caused a global economic recession, and its negative effects and high costs in stormed all business sectors and major companies around the world.

Hawar news agency held a dialogue with the former Governor's Advisor of the Central Bank of Yemen and the banking expert Rasheed Abdel Karim al-Ansi.

The text of the dialogue read:

*What is the role of the banking sector in reducing the repercussions of the new Corona pandemic?

There is an evidence that the global banking sector responded quickly to the repercussions of the Corona pandemic, the health crisis, the economic stagnation and the deadly economic recession, and the cessation of vital activities that are the main source of income in the affected countries, leading to the need for the intervention of central banks and private banks to jointly work to reduce the impact of the health crisis on the economic impact, the resilience of the global banking sector depends on the duration of the crisis.

*Is the banking sector holding up to the fallout from the new Corona crisis?

By reading and following up the new coronavirus crisis, we note that the epicenter of the virus spread are Europe and America, the two largest banking centers in the world, and the repercussions of the pandemic on these regions at an accelerated rate, many countries have stopped their activities, if we say that countries like Thailand, Egypt and Greece Italy relies on tourism as a source of national income, so the suspension of travel and inter-state flights threatens a major disaster for these countries, especially the situation in Italy and Greece, which have been in a major debt crisis for some time.

*How can these problems be overcome?

The intervention of central banks in stimulating and assisting private banks in curbing the Corona crisis is vital and critical, this comes with flexible policies and a quick response to any emergency to reduce the impact of the emerging virus on companies due to the high debt burden, while at the same time leading to a hunt returns over the past several years have exacerbated the likelihood of market liquidity.

*What is the role of central banks in overcoming this crisis?

 *What is the role of central banks in overcoming this crisis?

The economic recession that already existed in many economies, which has brought the US federal reserve and the European Central Bank to almost zero interest rates, limits the movement of central banks in these countries in taking emergency measures to counter the effects of the Corona pandemic, as many economists and the latest data from China explain.

Addressing the situation requires more global work and coordination between the public and private sectors, so banks around the world will play an important role as regular fixations for their customers, employees and economies in general, such as cash and deposit services, credit extensions, payment facilities, and manufacturing the whole market is a basic service.

*Are banks resilient to this crisis?

The ability of banks to withstand depends on the length of the crisis and banks may not last long. This has accelerated many actions taken by some central banks; for example the Central Bank of Egypt, which hastened to set high limits for withdrawals and deposits to face withdrawals from bank accounts within ten just days ago an estimated 30 billion Egyptian pounds was withdrawn. At the same time the Egyptian banks postponed the collection of installments and extended credit periods on borrowers due to the economic stagnation resulting from the optional lockdown and the declaration of a state of emergency and the near-total cessation of many activities, especially which are related to tourism.

Lebanese banks have also stopped implementing withdrawal requests in US dollars to run out of foreign currency stocks due to the interruption of the air traffic, which strengthen their domestic assets in foreign currency, and the flow of foreign currency through tourists and expatriates returning to Lebanon to spend their leave, most banks if not all have taken immediate measures.

*What important measures should banks take to reduce the crisis?

As an immediate response, banks should implement measures on the likelihood of the crisis developing and the length of the period, including several months to come: protecting the bank's workforce:

As a matter of the utmost priority, almost all companies have already taken proactive measures to protect their employees, contain the spread of the disease, which includes travel restrictions, other prevention-oriented policies, emphasis on hygiene in the workplace, alternative ways of working, and proactive communication. It takes more than weeks to come and that's what we've seen in China, for example.

The workforce of any bank is the milestone of any bank. Banks should study the risks of not exposing their workforce to the risk of the Covid-19  infection. Its spread in the working environment may lead to its closure to its customers due to the inability of its employees to continue performing their duties in their workplaces.

 We have noticed that many international banks instruct their customers to deal with their employees remotely using technology to carry out tasks and businesses and directed their employees to work separately and in far-flung places.

Focus on basic and technological services for individuals:

People remain in dire need for the banking services in difficult times. Banks must work as much as possible in providing the basic services, and as noted in China, people have continued to require only basic services such as ATMs from banks, a significant decrease in requests for other banking services. Here it depends on the ability of each bank to develop its technology to provide its services to the public. So each bank can close many branches and settle with major branches with a reduction in the number of manpower located in headquarters bank at the same time

Banks should also adopt the policy of transferring their customers to electronic channels and using electronic banking products and services from the beginning of the application to the service.

Social responsibility in supporting individuals and companies:

The majority of households and banks will be affected by the recession. Many companies will stop working or there will be a reduction in their work in the best conditions. Many of the workforce depends on wages for working hours and productivity, thus reducing per capita income while reducing corporate productivity and revenues. It will therefore not be able to meet its fiduciary obligations.

Here, banks should conduct a deep study of the companies and activities most affected by the crisis. To identify the sectors and activities most affected by the crisis, although I believe that all activities are negatively affected if we exclude activities related to sterilization and the materials used in sterilization. This study enables banks to reach a realistic and logical understanding of their customers, which makes them able to provide the solutions required to help their customers overcome their economic crisis, which may continue until after the crisis, especially if the crisis continues until next fall, and the loss of the tourism sector for a full season especially countries that depend on the summer season as a season of tourism such as the countries of Europe and the Middle East.

From a liquidity perspective, the pressure of supply and demand in the period prior to liquidity in the market has been significant lysed, as we have mentioned from the actions taken by the Central Bank of Egypt.

 Banks should remain vigilant about liquidity measures to support their customers, and ensure that clear indicators, such as corporate deposit rates and interbank lending, are monitored with an appropriate level of attention.