Impact of coronavirus on operational risk: News round up

  • 31 March 2020

As the effects of Coronavirus (COVID-19) spread across the globe, ORX has decided to provide a round-up of the operational risk impacts of Coronavirus on financial institutions worldwide to help you manage this risk.

These summaries and stories are sourced by the ORX News service, and cover significant new developments and media stories. Follow the links to read the articles in full.

Latest coronavirus & op risk news:

Updates, 2 April

Impact on operations

French insurer Maif says that most of its employees are partially unemployed but that it has maintained wages at 100%, a measure which represents a cost for the business of around €15m

RTBF, 2 April.

New Belgian cooperative, NewB, delays launch of ethical and sustainable bank planned for this summer

It is likely that the launch will be delayed until the end of the year, RTBF reported on 1 April.

Requests for state-guaranteed loans increase rapidly in France

As of the evening of 31 March, businesses had requested 21,000 loans worth €3.8bn. As of the morning of 1 April, these numbers had increased to 29,000 and €5.2bn, MoneyVox reported on 1 April.

Monzo CEO foregoes salary for 12 months and offers staff voluntary furlough for two months

Senior management will also take a 25% salary cut in an effort to overcome the economic downturn brought about by the coronavirus pandemic, the Independent reported on 1 April.

APRA outlines changes in reporting obligations for ADIs and RFCs in response to coronavirus

APRA, 1 April

Frontline bank workers to get pay top-ups during coronavirus crisis

Permanent TSB has offered to pay a customer support allowance of €50 a day from this week to the end of May to about 700 of mainly lower paid branch and call centre staff – equivalent to almost 30% of its workforce. Bank of Ireland has committed to paying €300 a month to employees who have to travel to a branch, call centre or other location up until the end of June, while AIB has offered a one-off voucher of €250 to all non-management employees of the bank. However, it is understood there is some disquiet at the bank because contract workers in the company are not included in the arrangement, The Irish Times reported on 1 April.

Goldman gives staff 10 days paid family leave due to coronavirus

Reuters, 31 March

Italian banks will advance up to €1,400 to laid-off employees

This will allow the banks to quickly carry out layoffs arranged before and during the pandemic. Banks will be reimbursed by the Italian public retirement system, Il Sole 24 Ore reported on 31 March.

AIB criticised for taking bank account fees of up to €100 from coronavirus unemployed

The Irish News, 31 March

European banking supervisors call for moderation on bonuses

MoneyVox, 31 March

Nordic Investment Bank raises €1bn under new coronavirus response bond framework

The Nordic Investment Bank has used capital markets to provide emergency financing in response to the coronavirus crisis. However, rather than selling a conventional or socially responsible bond, the supranational has developed a new framework specially designed to tackle the pandemic, Global Capital (paywall) reported on 30 March.

UniCredit to offer its shareholder foundations dedicated interest free loans up to the amount of dividends

UniCredit, 29 March

ABN Amro shares computer power in battle against coronavirus

ABN Amro is harnessing its data-driven research lab Dataistic to help scientists conduct research aimed at controlling coronavirus, Finextra reported on 27 March.

Securities and Exchange Board of India relaxes compliance regulations for mutual funds, AIFs, VCFs, portfolio managers and previously listed circulars

SEBI, 23 – 30 March

Actions to help clients

French insurer Maif will return over €100m to 2.8m insureds for around 3.6m vehicles

This represents almost a year of net income, as in 2018 Maif posted a net profit of around €127m. Since the start of lockdown, the number of claims has dropped by almost 80% compared to a “normal” year. The amount represents around €50 per insured vehicle. The insured will be able to keep this sum, but Maif encourages them to donate it to hospitals or research or to support the community, RTBF reported on 2 April.

Central Bank of West African States removes fees for electronic payments, among other measures, to discourage use of ATMs and cash, 2 April

By the end of last week, 28,000 mortgage payment breaks had been processed or were being processed, according to Banking and Payments Federation Ireland (BPFI)

Lenders have been reallocating up to half their staff in some cases, updating websites and introducing new online facilities to manage the huge volumes of applications and queries they have been receiving, The Irish Times reported on 1 April.

CaixaBank Asset Management will eliminate redemption fees for Standard, Plus and Premium fund classes

Bolsamanía, 1 April

NAB to offer emergency business loans as part of government’s coronavirus SME guarantee scheme

Businesses can apply for loans of up to A$250,000 with principal and interest repayments only applying after an initial six-month repayment holiday. NAB’s emergency business loan will be offered at a reduced rate of 4.5% for eligible businesses which have an annual turnover of less than A$50m for a term of up to three years. There will be no broker commissions paid on these new emergency business loans, AustralianBroker reported on 31 March.

Bank of Italy donates €55m for the coronavirus emergency

Bank of Italy, 31 March

Standard Bank Namibia announces capital and interest repayment holiday for up to 12 months to clients operating in the tourism sector

AllAfrica, 31 March

Dashen Bank contributes 10m Ethiopian birr ($303,000) for national emergency preparedness fund

AllAfrica, 31 March

United Bank for Africa donates 8.3bn Central African CFA francs ($13.7m) to help African countries tackle coronavirus

Gabon Review, 30 March

Standard Chartered commits $1bn in financing to companies tackling coronavirus

Standard Chartered will offer the financing at “preferential rates” to companies that provide goods and services to help the fight against coronavirus, and those planning the switch into making products that are in high demand to fight the global pandemic. These include manufacturers and distributors in the pharmaceutical industry, healthcare providers, and non-medical companies that have volunteered to add goods such as ventilators, face masks, protective equipment and sanitisers to their manufacturing output, Finextra reported on 30 March.

Heightened risk

European bank stocks suffered their worst month on record in March and US banks had their biggest fall since the 2008-09 financial crisis over fears the coronavirus will cause deep recession and a jump in losses from bad loans

IFR, 1 April

Carrefour Banque raises credit card contactless limit from €50 to €100

The increased limit will only apply in Carrefour stores, MoneyVox reported on 30 March. L’Agefi reported on 24 March that in general the contactless limit in France will not increase.

Cyber criminals target Zoom domains

On 30 March, cyber security firm Check Point reported that its researchers had observed a surge in suspicious Zoom domains as cyber criminals target popular remote working tools.

Financial stability

Brazilian central bank requires banks to carry forward point-of-sale payments to storeowners immediately to decrease time waiting for receivables

Yahoo, 31 March

Fed broadens access to dollars with repo agreement for foreign central banks

The US Federal Reserve has broadened the ability of dozens of foreign central banks to access US dollars during the coronavirus crisis by allowing them to exchange their holdings of US Treasury securities for overnight dollar loans. This “should help support the smooth functioning of the US Treasury market by providing an alternative temporary source of US dollars other than sales of securities in the open market”, in effect giving central banks with less widely traded currencies or more volatile exchange rates a way to access cash from the Fed, Reuters reported on 31 March.

Brazilian central bank announces R$1.22trn in resources for banks

Correio Braziliense, 23 March

Brazilian stock exchange performs worst in the world with coronavirus crisis

Yahoo, 23 March

Updates, 31 March

Impact on operations

ING Bank suspends dividend payments

On 30 March, ING Bank announced that it would not pay any dividends until at least 1 October in line with advice from the European Central Bank. The ECB has advised banks to withhold dividend payments and share buybacks and instead use the capital for lending purposes and as a buffer against losses. This follows announcements by UniCredit and Rabobank to also suspend dividend payments and share buybacks for at least six months, reports Reuters.

CFO of Jefferies Group Peg Broadbent dies of coronavirus complications

FT (paywall), 29 March

Banks to halt planned job cuts during pandemic crisis

Morgan Stanley and Citigroup join several European banks who have pledged not to continue with planned reductions in the workforce during the coronavirus crisis. HSBC Holdings, Lloyds Banking Group and Deutsche Bank previously announced that they would pause job cuts, along with Wells Fargo in the US. Credit Suisse’s CEO said that there would not be layoffs because of the virus, while Commerzbank and Société Générale may slow the pace of cuts, South China Morning Post reported on 27 March.

Basel III implementation postponed to increase operational capacity of banks and supervisors to respond to Covid-19

Bank of International Settlements, 27 March

UOB Singapore confirms case of Covid-19

On 26 March United Overseas Bank announced that a non-customer facing employee had tested positive for Covid-19. Other staff members from the same floor are now working from home, or on leave of absence if they had close contact with the infected colleague. The firm stated that it would carry out a deep clean of that floor and any common areas within the building.

CaixaBank cuts dividend in half, CEO renounces bonus

CaixaBank will halve dividend payments to shareholders and adjust its dividend policy for 2020. Additionally, the group’s CEO Gonzalo Gortázar will forego his bonus this year as a financial measure to fight the coronavirus crisis. The bank will also reduce its solvency ratio to 11.5% as permitted by the European Central Bank’s regulatory flexibility in light of the crisis, El Mundo reported on 26 March.

Bank of Italy announces closure of some branches

On 26 March, the Bank of Italy announced closure until further notice of its branches in Bergamo, Brescia, Padua and Piacenza.

Actions to help clients

Commonwealth Bank, Westpac suspend electronic payment fees

As part of their efforts to support small businesses as the Covid-19 pandemic continues, Commonwealth Bank of Australia and Westpac have temporarily paused merchant service fees for electronic card payments. Card payment fees can put pressure on small business that are processing more card payments in place of cash due to the coronavirus. CBA CEO Matt Comyn states that around 70,000 small businesses may have their fees automatically waived, and CBA is also waiving terminal rental fees. Westpac will refund terminal fees for up to three months, iTnews reported on 30 March.

BAD secures $3bn to fight Covid-19 in Africa

The African Development Bank (Banque africaine de développement, BAD) has raised $3bn through global financial markets through a social bond loan, Gabon Actu reported on 28 March.

Caixa Econômica Federal may extend mortgage holidays for homeowners

CEF said that mortgage payment holidays may be extended for up to six months if the pandemic continues. More than 800,000 households have already suspended their payments and in the past week the bank loaned more than 20bn Brazilian reals to customers affected by the crisis, Correio Braziliense reported on 27 March.

Measures taken by the insurance sector include premium suspensions

FSMA, 26 March

DFS issues new regulation requiring New York financial institutions to provide relief to customers affected by Covid-19

On 24 March the New York State Department of Financial Services issued an emergency regulation for regulated financial institutions requiring firms to provide 90 days relief from residential mortgage payments for any individual who has been affected by Covid-19. Also included in the regulation was a requirement to eliminate ATM fees, overdraft fees, and credit card late payment fees for any individual who demonstrates financial hardship as a result of the pandemic.

Heightened risk

FCA, AMF and ACPR warn against cyber criminals exploiting coronavirus

Best Execution, 27 March

ABN Amro incurs $200m clearing loss

ABN Amro’s clearing business has suffered a $200m loss due to the collapse of one of its clients in the extreme market volatility caused by the global coronavirus outbreak. The client was US firm trading in US options and futures and failed to meet minimum risk and margin requirements due to the market turmoil. The bank has closed out the positions and will include the loss in its Q1 results, Reuters reported on 26 March.

Financial stability

SFC to increase monitoring of fund managers

Hong Kong’s Securities and Futures Commission has reminded industry participants and intermediaries of their obligations to keep clients’ interests in mind given the potential impact of Covid-19 on market volatility. The regulator will step up monitoring activities via heightened reporting requirements and has reminded intermediaries of their obligations to ensure the suitability and timely dissemination of information to clients. SFC CEO Ashley Alder stated that the regulator was focused on “ensuring that the Hong Kong markets stay open and continue to function in a fair and orderly manner” given this historic period of volatility, Finews Asia reported on 27 March.

Reserve Bank of India cuts interest rates, puts loan payments on hold

The Reserve Bank of India has cut the interest rate to 4.4%, the lowest in 15 years, to protect the Indian economy. The RBI has also reduced the cash reserve ratio required by banks by 100 basis points, and introduced payment holidays of three months on equated monthly instalment payments for all fixed term loans. RBI governor Shaktikanta Das predicts a global recession from which India would not be immune, Times of India reported on 27 March.

ACPR relaxes reporting dates for the insurance sector

The ACPR has temporarily relaxed submission dates for European prudential reporting statements in accordance with recommendations by the European Insurance and Occupational Pensions Authority published on 20 March, and for additional national requirements. ACPR, 26 March

CMHC to take more mortgages off banks’ books to free up cash for loans amid Covid-19 crisis

Taxpayer-funded Canada Mortgage and Housing Corporation is expanding the number of insured mortgages it is willing to buy from banks from C$50bn to C$150bn. CMHC backstops most of Canada’s housing market by insuring the loans that finance them, which gives banks more freedom to lend out more money to consumers and businesses, CBC reported on 26 March.

Canadian government asks banks and credit card companies to lower interest rates

Global News, 26 March

Capital Markets including all dealers and advisers declared essential services during Covid-19 pandemic

BCSC, 26 March

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ORX News coronavirus operational risk news round-up 2 April 2020

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