Risk Assessment of the Banking Industry under the COVID-19 Crisis

Abstract

This paper shows that increased bank asset liquidity does not necessarily reduce risk-taking. The help provided by the government in the epidemic crisis has also been provided after the damage occurred. On the other hand, the merger of banks is not a good thing for low-risk banks. Regulators should conduct frequent financial reports on banks to ensure that the risk of sudden default due to weak supervision is reduced. Foreign exchange risk management is especially important for banks involved in cross-border transactions and foreign exchange business. Reasonable control of the market exchange rate prohibits the impact of the foreign exchange black market on the market. The COVID-19 epidemic has led to fluctuations and instability in global exchange rates and the banking industry. For the foreign exchange transaction risks caused by exchange rate fluctuations, banks usually need various foreign exchange derivatives instruments to ensure that foreign exchange risks are effectively managed.