COVID-19 remains an unresolved health challenge that has resulted in tragic loss of life. The economic contraction emerging in its wake will likely be the deepest since World War II and the road to recovery will be long and challenging.
Over the past few months, banking leaders have displayed resolve and resilience, moving swiftly to protect the health of employees and customers, ensure the continuity of basic banking services, and build up capital, liquidity, and cost buffers to strengthen their institutions. In the coming months, banks will start to return to something resembling normal service, reopening offices and branches. But so much has changed over the past few weeks: customers’ financial needs, the way they engage, how employees work, and even society’s expectations of banks.
The industry will likely face a prolonged period of economic pressure and banks’ actions in the coming months will set their performance trajectory for the years ahead. Banks have shown during the lockdown what is possible in terms of speed and innovation. There is no going back. Now is the time for banking executives to reimagine how their institutions operate. Bold vision and disciplined execution on a set of key imperatives will ultimately differentiate the leaders from the laggards as this crisis abates.
The crisis will put banks under prolonged stress
It is too early to predict the full impact of the pandemic. The outcome will depend on the length of lockdowns, the drop in demand, and the shape of the recovery. The scale of government support will also be critical—in the last month, some European governments have rolled out packages worth up to 30 percent of GDP and this level of intervention might continue.