UK’s financial system claims to survive Coronavirus hit
Britain’s banks inform investors that they are optimistic that their balance sheets are strong enough to hold out against the Coronavirus hit. According to the Senior Bank Executives, the health of Britain’s financial system is in a good state and the supporting measures introduced by the Bank of England over the past two weeks give them greater confidence.
Marshall Group tweeted regarding the event:
UK banks reassure investors as coronavirus impact grows https://t.co/fONuhk4isY via @financialtimes
— Marshbell Group (@MarshbellG) March 23, 2020
The CEO of Lloyds Bank, António Horta-Osório, was one of the senior executives tried to address the concerns of investors at the Morgan Stanley European financial services conference in London. He stated, “I am absolutely confident we are going to see a massive government and regulatory response that has to be taken into consideration.” The government announced a new £330bn emergency rescue package for UK business, hours after his address.
The main concern for bankers is customers in financial distress, the inflow of the demand for funding, and the difficulties of maintaining services. The most evident of strain is found in frontline customer-facing roles where it is tougher for staff to work from home. The amount of requests for funding from business customers has increased to up to three times and is expected to further escalate in the next few weeks.
Despite being optimistic about surviving the on-going crisis, banks predict a significant short-term pain ahead. Hundreds of millions of pounds worth annual profits of each bank will be brought down due to the Bank of England’s rate cut. Greater harm will be inflicted to the bottom lines, as the crisis intensifies, leading to an increased rate of loan default.
In spite of these barriers, however, the steps announced by the Treasury and the Bank of England are largely anticipated to shield the sector from the worst possible outcome.
“We’re in a very strong position going into this scenario,” stated Alison Rose, Royal Bank of Scotland Chief Executive. She plans on ramping up cost-cutting plans to offset some of the impacts of the Bank of England’s emergency interest rate cut.
