Risk Assessment of the Banking Industry under COVID-19

Abstract

The outbreak of the COVID-19 pandemic in 2020 has brought various risks and threats to the entire banking industry, from which we can also know the importance of bank risk management. This paper mainly describes, analyzes, and summarizes the five aspects of liquidity risk, credit risk, market risk, and systemic risk. With regard to liquidity risk, the article describes the impact of the Federal Reserves continuous interest rate hikes on the banking industry in order to curb the high inflation caused by the COVID-19 pandemic and takes the collapse of Silicon Valley Bank as an example for analysis. Regarding credit risk, this article takes Credit Suisse Bank as an example. Highly leveraged speculative transactions caused huge losses to the company due to the high default rate during the epidemic. For the analysis of market risk, the article synthesizes the deeds of Credit Suisse Bank and Silicon Valley Bank, focuses on the interest rate, and the reasons for the collapse of Credit Suisse and Silicon Valley Bank are different on the surface, but the underlying logic of the two events is traced to the same There is a close relationship between the current interest rate environment and the changes in interest rates in recent years. As for systemic risk, the article mainly writes about the purpose and effect of Basel III and the supervision of the capital adequacy ratio during the epidemic. Overall, commercial banks need to closely monitor these risks and take steps to mitigate them to ensure their stability and continued operations during the pandemic.