COVID-19 is having far-reaching consequences for the global economy. Financial markets everywhere are experiencing a historic crunch and further global financial and economic crises are looming large. Banks are being forced to react in various areas – among others, in liquidity risk management to prevent bottlenecks.
One of the most important aspects from a risk management perspective is a detailed analysis of COVID-19 effects on the credit portfolio. It is presumed that commercial credit customers will soon become increasingly insolvent. Bloomberg for instance reported that half of all listed retail companies in China could collapse. Italy has ordered the closure of all "non-essential" companies and factories, which means that there will be large income gaps; Ticino is also closing down industrial plants. While authorities around the world are in the process of cushioning these effects with a range of countermeasures, it is nevertheless expected that the global economy will experience a further crunch in the coming weeks, Switzerland included. As a result, private client loans may also be affected if the crisis continues to spread to private investment portfolios or mortgages. Significant value adjustments could be imminent.