Question

The first half of 2020 has been very challenging for the Australian banking sector with major bush fires, then several severe storms (e.g. Canberra hailstorm) and now the COVID-19 outbreak and shutdown of the Australian economy. We have discussed, how the impact these events—particularly COVID-19—has had on the banks as well as how the banks and regulators have responded to the challenges.

You are the team leader of the Strategy and Operations team at the Commonwealth Bank of Australia. The CEO and Board have asked you to write a series of three short memos outlining the impact that COVID-19 has had on the bank and your recommendations for operations in the next 6 to 12 months. Each of the memos will focus on one fundamental risk and should be written independently of the other memos so that each memo is self-contained (e.g. when reading memo 1, you do NOT need to read the memos 2 and 4 to understand memo 1).

Question
Write a memo outlining the impact that COVID-19 has had on credit risk for the bank. Suggest some strategies the bank can use to manage this risk in the next 6-12 months.

Answer 1

COVID 19 has impacted the worls economy to a great extent.

manufacturing goods and providing services by maintening the social diatance and trying to avoid COVID 19 spread is difficult task.

Bank being a backbone of the economy should provide support in such a way that cycle of economy will move in positive direction.

bank should provide all digital tools for retail as well as corporate finance.

loans should be granted at subsidiesd rate to the business impacted by the COVID 19.

Working capital facility should be introduced to meet the fixed business expenses such as salary , rent etc.

instalmentss and intrests which are falling due during lockdown period should be differed by 6 months and those differed amount shlould be recovered in proportionate such as 20% of total differed amount every month for next 5 months.

this will give brearher to the entrupernuer and bosot growth of the economy. moreover since loans EMI and intrerest are differed there will be loss of income to some extent but less of resultant NPA cases.