COVID-19 vs. Banks: Uppercuts & Opportunities

Key messages

Impact of the Covid-19 crisis



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What a wild ride it has been so far. While writing this (May 25th 2020), stocks of European banks are - on average - down over 40% Year-To-Date (YTD). Historic market volatility, as a result of the coronavirus outbreak, hit financial institutions once again. Volatility is here to stay because the economic impact of the pandemic is still unclear. As a result, banks should brace for second-round effects which are estimated to exceed worst-case stress test scenarios. However, (digital) opportunities arise. Let’s have a look at the new abnormal.


Currently, the European Central Bank (ECB) aims to support the real economy by purchasing additional public and private sector assets under the Asset Purchase Programme (APP) and Pandemic Emergency Purchase Programme (PEPP). The ECB flooding the financial markets to limit the impact of the economic shock will further squeeze banks’ net interest margin. Consequently, banks will have to increase their non-interest revenue if they want to maintain current returns on equity levels. But it’s doubtful whether customers are willing to accept additional fees given the current circumstances.

Although different countries and central banks are doing anything within their power to keep businesses afloat, economists expect the pandemic to cause numerous bankruptcies and a severe drop in GDP. Consequently, the weighted average Non-Performing Loan ratio, which dropped to 3% in June 2019 (compared with 6% in June 2015) is expected to pick up again (EBA; 2019). Additionally, a large amount of market-based corporate debt rated BBB could get downgraded, endangering debt sustainability. As a result, banks could face several uppercuts on balance sheet level quite soon.

In the long term, financial institutions should brace for second-round effects which will affect their cost/income ratio (e.g. consumers postponing consumption, a decrease in real estate value, decreasing sales volumes of financial products, declining investor confidence and a sharp increase of the unemployment rate). Internally, banks should monitor data breaches, cyber-attacks and the mental health of employees working from home in case of a prolonged lockdown.

Banks should brace for second-round effects which are estimated to exceed worst-case stress test scenarios. However, (digital) opportunities arise.


It goes without saying that financial institutions have a big role to play. Households, small & medium-sized enterprises, etc. depend on them transmitting the central banks’ efforts into the real economy. Apart from offering financial helplines (i.e. additional credit, mortgage/insurance payment holidays, interest fee waivers, overdraft buffers, etc.) and increased volumes of financial transactions (i.e. more fees) we see other opportunities from which banks might be able to benefit in the long term. 

The current COVID-19 crisis offers banks the opportunity to reinforce their ‘phygital’ footprint. On the one hand, banks might be able to boost the digital leap by accelerating contactless payments, building new partnerships, supporting digital document signing, promoting online platforms, expanding mobile wallets and encouraging customers to use them. Local agents at physical branches, on the other hand, can help to capture constantly changing customer expectations, take care of financial needs of (corporate) clients and (remotely) advise them on different levels. Enhancing customer engagement by providing clear communication, tailoring internal/operational processes to customers’ changed expectations and offering the proper product to the right customer at the right time will be of vital importance. 

Last but not least, banks are given the opportunity to review internal workplace dynamics. As the virtual era approaches, employers should seize every chance to lift the digital transformation of their organizations and focus on the mental wellbeing of employees. Remote self-steering teams and other new ways of working will become the new normal in a post-COVID-19 world, which will reduce commute time and hence increase flexibility & productivity. Redesigning learning & development will be fundamental but will also offer a window of opportunity to motivate employees and boost innovation.


Persistent low interest rates, significantly increased credit risk and second-round effects backs banks into ropes. However, the current crisis also offers banks certain - long term - opportunities. By reinforcing their ‘phygital’ footprint, enhancing customer engagement and reviewing internal workplace dynamics, banks could punch their way back into the fight.


  • European Central Bank (2020). How the ECB is helping firms and households.time to market. This while reducing the operational risk.
  • European Banking Authority (2019). EBA Report on NPLs.

How can TriFinance Financial Institutions help?

  • Risk management: A crisis of this magnitude reveals and confirms the importance of an effective risk management framework to identify and respond to critical risk with ramifications across the whole enterprise. Adjusting internal/operational models and processes will result in additional risks and compliance issues. TriFinance can reinforce your risk management department by helping you to identify & mitigate these risks. Additionally, we help our clients evaluate and adjust their internal control environment for situations with fewer employees available and a large portion of the work conducted remotely.
  • Process management: Having a stress scenario such as a pandemic is an opportunity for organizations to identify their pain points and tackle these through the redesign of the current processes to make them more robust and risk proof. We also expect more investments in the digitization and robotization of process activities in the coming months and years. We help our clients with the design, analysis, set-up and implementation of virtual employees and digital processes.
  • Operations: Before the pandemic, TriFinance was already convinced that the way Operations are managed within Financial Institutions would fundamentally evolve in the years to come. This crisis will foster and accelerate the need for better, faster, and above all more flexible processing of transactions. Within core Operations activities such as Credits, Payments and Securities we support clients reaching operational excellence through managing the IT & cultural legacy, improving the productivity, moving towards exception management, developing accurate & automated reports and having better and optimization of workflows in a constantly changing environment.
  • Support new ways of working: TriFinance offers a mindset of change, hands-on mentality and initiative-taking in your journey towards new ways of working. Apart from the outside-in view, TriFinance can help you with the implementation of solid processes

About the Author

After finishing his Master in Banking and Finance at UGent, Wouter started his professional career at TriFinance. As a member of TriFinance’s Young Hub Program, Wouter worked on several risk management projects at four major clients within the Belgian financial sector. Currently, Wouter is working as a Commercial Risk Expert at one of Belgium’s largest retail banks. Wouter is a member and regular contributor to the TriFinance Risk Management & Compliance practice.

About TriFinance’s Risk Management & Compliance Practice

The practice ‘Risk Management and Compliance’ practice focuses on supporting banks and insurance undertakings in anticipating and addressing the tighter regulatory standards relating to risk management, compliance and internal control by monitoring the different European and local regulatory and supervisory bodies.

For more information on the Risk & Compliance Practice, please check out the following page.

For more info, you can always contact Wouter Spitaels.
( or +32 2 712 08 90).

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