S&P Global Market Intelligence

Managing Credit Risk During the COVID-19 Crisis and Recovery Phase in Europe

Contributors

Gonzalo Gasos, Senior Director of Prudential Policy and Supervision, European Banking Federation (EBF)

Arsene Lui, Senior Analyst, Analytic Development Group, S&P Global Market Intelligence

Over the past year, the European banking industry has been impacted by volatile market conditions, deteriorating quality of credit risk and business continuity challenges. This has triggered banks to move more quickly to build real-time data and analytics into their credit-decision engines, according to panellists at the European Banking Federation and S&P Global Market Intelligence’s most recent “Banking Essentials” webinar.

10 Key Takeaways

The credit risk deterioration due to the pandemic diverged among European countries
Market-based credit risk indicators show that a robust recovery is underway
European companies are still struggling with short-term liquidity
There have been major challenges in assessing the credit quality of portfolios during the Covid-19 crisis
Credit models developed before Covid-19 are still fit for purpose
Support has created a moment of calmness
Financial distress may be temporary
Conventional metrics are not sufficient
There are options for banks to deal with sour assets
There is an impasse in the NPL market