The Bank Business Model in the Post‑Covid‑19 World

Thursday, June 18, 2020

The second report in the series on ‘The Future of Banking’ by CEPR and IESE Business School The Bank Business Model in the Post‑Covid‑19 World, by Xavier Vives, Elena Carletti, Stijn Claessens and Antonio Fatás, tackles the mounting challenges faced by the Banking Sector and examines the competitive responses of the different players – incumbents and new entrants. It also analyses the policy and regulatory issues associated with the digital world, and suggests future policy options for reform.


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The banking sector faces an unprecedented strain from the Covid-19 pandemic and related economic crisis. Although banks have performed robustly in the wake of the immediate threats caused by the pandemic - largely thanks to major improvements and increased liquidity after the crisis of 2007-2009 – banks will face a potential fallout from impending large-scale household and firm bankruptcies. Banks also face significant pre-existing threats of persistently low interest rates; regulatory changes; and increasing competition from shadow banks and new digital entrants that have challenged in the pre-Covid world the traditional bank business model.  

A central finding of the report is that the Covid-19 crisis will accelerate the pre-crisis tendencies of the banking sector, as subdued growth and low interest rates will persist for a long time and digitalisation will advance. The sector will need a deep restructuring.