The world's banks need to step up credit and support the recovery from the worst global recession since the great depression after they stayed resilient through the COVID-19 pandemic, industry leaders said at a Jan. 18 conference.
"We need to back the clients, to help them ... through lending, and probably at a time of recovery, to offer them liquidity to restart their activity," Jean Lemierre, chairman of BNP Paribas SA, said at the Asian Financial Forum, organized online in 2021 due to the pandemic. The forum is an annual two-day conference hosted by the Hong Kong government and features financial experts, business leaders, economists, policymakers and investors.
The banking industry learned from the 2008 global financial crisis and has become more generous with lending at a time of crisis, Lemierre said, outlining the role banks will be required to play in the new year as the world economy hobbles toward recovery.
The IMF predicts world GDP to grow 5.2% in 2021, after an estimated 4.4% contraction in the last year. COVID-19 has seen a fresh resurgence in many parts of the world and deaths have crossed the 2 million mark, though several vaccines offer hope in the new year. Banks across the world stepped up provisioning and sought to conserve cash amid the pandemic.
A rebound in economic growth, stronger balance sheets and support from the authorities should limit bank downgrades in 2021, S&P Global Ratings said in November 2020, noting that it cut its ratings on fewer banks than other corporate sectors in 2020 as the industry is less procyclical.
Urs Rohner, board chairman of Credit Suisse Group AG, said that unlike in 2008, when financial institutions were the trigger for a global economic crisis, banks have supported markets throughout the coronavirus-induced recession.
"The role of banks evolved during this period from being the root of the problem in 2008 ... to playing a decidedly positive role during the pandemic recently by providing critical financing liquidity ... into businesses at the height of national lockdowns," Rohner said.
Asia to lead recovery
José Viñals, group chairman at Standard Chartered PLC, said Asia is likely to lead the global economic recovery from the pandemic.
China, the first country to be affected by the disease and the first to recover from it, reported Jan. 18 that its GDP grew 2.3% in 2020, helped by an annualized growth rate of 6.5% in the fourth quarter. The better-than-expected outcome confirmed that the world's second-biggest economy is recovering faster and will outperform most of its major rivals that are expected to report a contraction for 2020.
"China and other parts of Asia ... are going to be very supportive in this global economic recovery," Viñals said. "ASEAN is one of them. India also, because it fell very significantly in 2020, I think there is going to be a rebound. But certainly I think that China is going to be a major force contributing to the global economic growth."
However, he said that global recovery "is likely to be subdued" and that pre-coronavirus-level growth will "take a couple of years in most parts of the world." Supportive monetary and fiscal policy and the rolling out of vaccines throughout the world will aid the recovery, he added.
Wong Kan Seng, the chairman of Singapore's United Overseas Bank Ltd., said China-U.S. tensions may continue to have repercussions for the banking industry.
COVID-19 and the geopoliticial tensions are issues that "have long tails, which will continue to impact the world for a long time to come even if they are resolved, if at all, and the financial industry will not be spared," he said.
However, StanChart's Viñals expects a more stable, predictable, multilateral and constructive relationship between the U.S. and China under the incoming Biden administration.
