High levels of leverage make companies more vulnerable
The Covid-19 outbreak has put an enormous pressure on central banks to come up with a plan to save the global economy. While their focus is mainly on the same tools used in 2008, there are calls to revisit traditional monetary policies in light of the changed economic environment.
Financial impact of COVID-19
At the beginning of 2020, the coronavirus COVID-19 disrupted the world in a manner that hardly anyone was prepared for. A vast amount of resources is required to get through this phase. For insurance companies, this means facing greater uncertainty regarding the management of financial risks on their balance sheet at a time when they are already dealing with the low interest rate environment and major regulatory changes, such as IFRS 17.
Corona Crisis Impact
In March, the corona crisis unfolded in the Western world. Several governments have chosen to implement a so-called “lockdown” to slow down or prevent spread of the coronavirus. However, these lockdowns have caused huge problems for a significant number of companies. What do the resulting credit rating downgrades in different sectors show?
The European Banking Authority (EBA) is regularly executing EU-wide stress tests focussing on enhancing transparency, restoring trust in the financial sector and improving banks’ resilience after the financial crisis. To improve the stress testing methodology and processes, the EBA has organised numerous workshops and other (in)formal interactions with stakeholders.