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

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

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