25th September 2020

Moody's comments on global banks outlook

The outlook for global banks turned overwhelmingly negative in early 2020 as the pandemic struck and restrictions on economic activity began to bite. Over three-quarters of 70 Moody’s Banking System Outlooks are now negative, which contrasts with the 14% that were negative at the end of 2019.

However, after ten years of broadly benign economic conditions, and relentless regulatory pressure to reinforce balance sheets, most banking systems are in good shape and can withstand the inevitable rise in bad debts over the coming months.

“In contrast to the financial crisis, the banking system is more likely to act as a shock absorber rather than an amplifier,” says Nick Hill, Managing Director, Banking at Moody’s Investors Service. “But a second wave of the pandemic that leads to new lockdowns and economic turmoil could cause more lasting damage to banks’ credit profiles.”

The ability to preserve and restore capital in the medium term will be a crucial support to banks’ creditworthiness, Moody’s Investors Service said in a report this week.

Moody's Trends(42 articles)