The Role of the Banking Industry During the Covid-19 Crisis: Financial Policy Intervention and Risk Management

The Role of the Banking Industry During the Covid-19 Crisis: Financial Policy Intervention and Risk Management

2. What is the impact of Covid-19 on the banking industry? 

This era Covid-19 of low wages and profits that led to important policy intervention by financial oversight officials and governments, the banking industry has also played a part in helping companies and households. The relation between the industry and the actual sector as a payment, savings and credit services provider and risk management services expands the negative effects on banks and other banks of the Covid-19 crisis, since banking services can be delivered remotely and do not depend upon direct communication from customers. The banking sector is, however, only indirectly influenced. Moreover, banks need to hold extra reserves to protect against real property threats, Counter-cyclical reserves act as a backdrop to weaker economic times, while systemic buffers are designed to defend against general threats, such as the potential contagion in financial markets when a bank or commodity problems occur. Prudential policy takes primarily proactive steps under regular situations to ensure that banks construct enough stocks to withstand any harm. Around the same time, in this low revenue and income time of the banking sector, businesses and households have a role to play in promoting essential political acts of financial supervisors and governing

3. What were the fundamental causes of the 2008 and 2009 financial crisis? 

The financial crash was largely triggered by financial reform. The growing deficits of government are mainly a result of the banks' private debt in recent years. The government's takeover of banks' losses was a scandalous support for profits: the bank's losses had been socialized while a tiny minority's private hands continued to bear the revenues(Hirth, Tumlison and Archer, 2013)..

4. What do you think will be the future of banking? 

The vision of the banking industry will be very different. In light of changing customer demands, evolving technology and market templates, banks will now have to launch plans to better ready them for future banking. Unless a bank misses the momentum, its status alongside new technical actors and networks will remain robust (Kenton, 2019).. The banking sector has been very dynamic and every bank has its customers unique goals and strategies. Some want to develop plans for such goods and programs, depending on these tactics. In order for the customer to enjoy open competition in the finance market, most organizations have opted to abolish the savings and current accountabilities commission for existing and new natural and legal persons.

5. How are state-owned banks and privately held banks different?

A central bank frequently linked to progressive policies does not actually have as its primary purpose the protection or general interest of the people, and the state, either directly or by means of entities, is owned or the largest shareholder. In comparison, corporate banking only seeks to maximize its owners' private gains and is its private majority (Hayes, 2019).

6. What makes online Microlending different? 

Microloans include small credits issued not by banks or loan unions but by individuals. Such loans may be provided by one or more persons each contributing a portion of the overall sum. The peer-to-peer economy revolutionized the way people do business, with the finance industry using P2P apps making some amazing strides. Microlending or microcredit is one of the most popular applications (Hirth, Tumlison and Archer, 2013).

8. How does competition in the banking sector affect the economy?

There has been considerable debate about the relationship between competition in the banking sector and financial sector stability. This hypothesis is founded on the notion that a reasonable level of competition would promote steady revenue flows to banking license holders such that a prudent banker does not lose such lucrative long-term gains by taking higher risks in the short term. In other words, the prospect that a business force can generate sufficiently high income mitigates the interest of organizations to assume unreasonable levels of risk (Lange, 2016). This practice, also stimulated by the moral hazard resulting from the reduced responsibility.

9. What makes one bank more efficient than another? 

Efficiency reflects how much of the gross operating profit result of financial intermediation, commissions and services is absorbed by administrative expenses (personnel and other administrative expenses). For example, an efficiency of 50% for a bank means that for every $ 100 that they enter, they spend $ 50, that is, the lower the efficiency indicator, the better. This involves factors such as financial results, bank size, productivity, administrative expenses, and operating costs, among others (Kenton, 2019).

11. Choose one of the major regulations in the banking industry and discuss what impact it has had on the industry. (e.g., The Dodd-Frank Wall Street Reform and Consumer Protection Act is a United States federal law that was enacted on July 21, 2010; Gramm-Leach-Bliley Act of 1999; Sarbanes-Oxley Act of 2002; The Housing and Economic Recovery Act of 2008). You can read about other laws passed here: https://www.fdic.gov/regulations/laws/importan  t/

Passed by Congress in late 1999, the Gramm-Leach-Bliley Act, also recognized as the Financial Services Modernization Act. The financial services market has been deregulated by lifting obstacles separating private banking from investment banking, industrial and insurance undertakings. In short, the act allowed bank holding firms to diversify to become financial holding firms (Sorokina, 2012). More than sixty five years of US banking rules were to be reversed and drastic improvements were expected.

Reference list

1. Hayes, A. (2019). What Is Microlending And How Does It Work? [online] Investopedia. Available at: https://www.investopedia.com/articles/personal-finance/040715/what-microlending-and-how-does-it-work.asp.
2. Hirth, R., Tumlison, C. and Archer, G. (2013). Is Microlending Counterproductive? A Network Perspective on Microlending. Academy of Management Proceedings, 1(1), p.aomafr.2012.027.
3. Kenton, W. (2019). Efficiency Ratio. [online] Investopedia. Available at: https://www.investopedia.com/terms/e/efficiencyratio.asp.
4. Lange, P. (2016). More Bank Competition Good for Economic Growth in the Gulf. [online] World Bank. Available at: https://www.worldbank.org/en/news/feature/2016/06/21/more-bank-competition-good-for-economic-growth-in-the-gulf.
5. Sorokina, N. (2012). Long-Term Impact of Gramm-Leach-Bliley Act on the Financial Industry. SSRN Electronic Journal.