The Role Of Banks On Economies Post The Covid-19 Pandemic

The role of banks on economies post the Covid-29 pandemic. The global pandemic that is the Coronavirus has shaken economies and put the world in a position of uncertainty, where governments literally have to choose between life and livelihoods. However, on the bright side, it has also brought with it a potential future.

In the immediate aftermath of the pandemic, banks have played a supporting role to clients and communities. Standard Chartered announced a commitment of US$1 billion globally to support companies in the health delivery supply chain to combat the COVID-19 pandemic, and an additional US$50 million to assist communities in presence markets, especially Africa. 

Generally, banks have entered the COVID crisis much stronger and resilient than they did before the global financial crisis of 2008. This resilience is thanks to the raft of regulatory reforms and stronger supervision since 2008, aimed at ensuring adequate capital and liquidity buffers against market-wide stress. This is all comes with some underlining fine print of course.

Many governments had to engage in emergency measures and massive fiscal stimulus packages to provide relief to businesses and household sunder strain due to the effects of the pandemic. In present day, total lockdown is now perceived as a blunt instrument in responding to the pandemic due to its potential for economic destruction. This has led to easing of lockdown restrictions and encouraging both corporate and individual responsibility to obey public health recommendations.

As the world emerges from lockdown, the nature and shape of the recovery is an important variable. We are only beginning to understand and measure the true economic cost of the pandemic, transmitted through lockdown and the disastrous effects on growth and the viability of some sectors. Many companies face possible closure and are faced with making tough but necessary choices just to stay afloat.

While banks certainly have a critical role to play during and post crisis, the reality is there is no certainty or clarity on how events might unfold. Livelihoods and economic security look fragile in the short run as the pandemic exposes cracks in the existing socio-economic order globally. This systemic stress could precipitate a re-purposing of legacy political, economic, social and security arrangements by national governments which could be consequential to businesses recovery and viability, household incomes and social cohesion. For the banks, it becomes nothing short of a waiting game.

National governments need to determine the right balance between restarting economic activity and growth without compromising the capacity of healthcare infrastructure. The ability to do so would in turn influence the nature and shape of the recovery as well as which companies or sectors can survive the new reality, and which would fail. Then there is digitization. Digitization and the new ways of working will define who stays competitive, productive and can survive. Now is the time to invest in digital solutions to stay afloat.