Banking Risk Assessment During the COVID-19 Crisis

Abstract

The COVID-19 outbreak has had a profound impact on the global banking industry and poses a variety of risks. Through an analysis of the global banking industry, this paper examines in detail the impact of COVID-19 on liquidity risk, credit risk, market risk, and systemic risk. The study finds that liquidity risk is mainly related to the recent Fed's interest rate hike, which, overlaid with the impact of the epidemic on the economy, has exacerbated banks' liquidity risk. Credit risk is mainly related to the increase in non-performing loan ratio and banks' credit management while studying Credit Suisse which plunged due to credit management. Market risk is mainly reflected in changes in interest rates and stock market volatility, which in turn contributed to a series of large bank losses and the bankruptcy of Silicon Valley Bank. Factors such as climate change and the development of digital currencies pose the systemic risk to banks, and the role of Basel III in insulating banks against systemic risk is significant. Based on these findings, the authors recommend that governments and regulators should take steps to address these risks and provide additional policy support.