Impact of coronavirus on operational risk: ORX News round-up
- 18 December 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, 18 December
Impact on operations
Portuguese economy contracts by 8.1 per cent due to the pandemic
Banco de Portugal, 14 December
Société Générale to reduce number of branches from 2,100 to 1600
L’Agefi reports on 7 December, that Société Générale had announced its plan to merge its retail banking networks with those of its subsidiary Crédit du Nord to generate savings in the medium term. The banking group intends to reduce the number of branches from around 2,100 at the end of 2020 to around 1,500 at the end of 2025.
France: Insurers are urged to do more in support of hotel and catering industry
The French Minister of the Economy and Finance, Bercy, demanded that insurers do more to help this sector or heavy penalizing measures would apply.
L’Agefi (paywall), 1 December
Actions to help clients
Italy: Mortgage suspension approved until 2021
mutuionline.it reports on 16 December that, in view of the prolonged difficulties caused by the pandemic, the suspension of loan instalments will be extended until December 2021.
France: Insurers freeze their rates for the sectors most affected by the crisis
L’Agefi reports on 7 December that insurers have undertaken to freeze contributions for professional multi-risk insurance in the restaurant, hotel, tourism, events, sport and culture sectors for the whole of 2021. These measures will apply to all companies up to 250 employees.
Portugal: Insolvencies increase by 12 per cent as a result of the pandemic
Jornal Económico reports on 11 December that 2,796 new companies were created in Portugal, a decrease of 23 per cent compared to the same period in 2019. Only online commerce has seen a growth between June and November.
Clothing store fights Zurich American Insurance’s dismissal of coronavirus coverage dismissal
Law360 reports on 14 December that clothing store America’s Kids filed a suit against the insurer in June seeking coverage of business interruption losses stemming from the pandemic, saying its policy considers microorganisms — like the virus — as able to cause "physical loss or damage." Zurich argued that the term only referred to visible, structural damage and asked the court to throw out the suit. However, America's Kids asked the court to reject the insurer’s bid saying that no such qualifier is in the policy, and that dictionary definitions of "damage" include losses of "value" or "usefulness."
Belgium: 25 arrests over coronavirus relief funds fraud
31mag.nl reports on 16 December that since the beginning of the crisis in March, 900,000 people benefitted from government subsidies. However, many benefits claims turned out to be fraudulent, often using stolen identities and fake companies. Because of the emergency of the situation, benefits were granted almost immediately, and applicants’ identities only verified later. According to investigations the damage amounts to €2m.
Financial stability & regulatory
Brazil: Federal Government begins campaign to recover coronavirus aid fund from customers who irregularly claimed the benefit
olindahoje.com.br reports on 7 December that the Federal Government would send SMS messages to 2.6 Brazilians who had unduly received government aid demanding the return of funds. If each individual repays at least a portion of the BRL 600,00 the government would recover BRL 1.57bn.
Japan: 19,000 individuals return coronavirus aid benefit worth JPY 6.4bn
portalmie.com reports on 2 December that following a government campaign for the return of government aid funds, 19,000 people spontaneously returned the money. According to a survey conducted by the Micro and Small Business Agency, most people who returned the money said they had applied incorrectly, and a small portion admitted it had done so fraudulently.
Updates, 30 November
Impact on operations
Pandemic and internet banking push Japan's banks to revamp their branches to adapt to the digital age
The Japan Times, 26 November
French Insurance Federation (FFA) specifies new terms on pandemic insurance
La Tribune (paywall), 26 November
Kenya: Coop Bank and Absa bank profits drop due to the pandemic
Co-operative Bank of Kenya’s net profits in the first nine months of 2020 dropped by 10 per cent to Sh9.8bn due to the pandemic. Absa bank was hit the hardest, making a net profit of Sh1.9bn, which was a drop of 65 per cent compared to Sh5.5bn that it made in the same period last year. KCB profits dropped by 43 per cent while Equity Bank’s declined by 14 per cent.
The Standard, 19 November
South African insurer Santam ordered to compensate a hotel operator because of activity shutdown caused by the pandemic
jeuneafrique.com, 19 November
Belgium: Beobank branches only accessible by appointment in view of measures put in place to prevent the spread of coronavirus
Beobank, 17 November
Portugal: Six major banks declare impairment losses of €884m until September 2020
Jornal Economico (paywall), 16 November
Number of bank branches across Europe declines in face of digitalisation
The Financial Times, 16 November
ING to cut 1000 jobs by the end of 2021 in view of current economic downturn caused by the pandemic
The bank will close its offices in South America and some in Asia to "focus on core customers and simplify its geographic footprint". However, ING CEO, Steven van Rijswijk, reports “resilient results” in the bank’s Q3 results with net profit down by 41.4 per cent to €788m, a smaller slowdown than in the previous quarter.
Libre Eco, 5 November
UAE: Motor insurance premiums fall affected by coronavirus
Middle East Insurance Review, 3 November
Major banks tell London staff to return home ahead of England lockdown
Several investment banks had been encouraging more staff to work in their offices in recent months since the first lockdown in March, but the latest measures by the government have forced them into a reversal of policy.
Reuters, 2 November
Brazil: Bradesco to close over one thousand branches because of major re-structuring and increase in online banking
Jornal do Comércio, 30 October
The National Bank of Angola collects information on the impact of coronavirus on small-medium enterprises (SMEs)
allAfrica, 31 October
Actions to help clients
Morocco: Attijariwafa bank has released DH 27.1bn since the start of the health crisis
Aujaurdhui.ma, 19 November
Société Générale Cameroon and the European Investment Bank (EIB) set XAF10bn credit line to support local SMEs
businessincameroon.com, 18 November
The UK Financial Conduct Authority announces proposals for further support to consumer credit borrowers impacted by coronavirus
FCA, 4 November
Italy: Assiteca insurance to offer cover for teachers and non-teaching staff in case of coronavirus contagion
Oggi Treviso, 3 November
Russia: Sberbank estimates that Russian economy will lose $44bn to cybercrime in 2020
Infosecurity-magazine.com, 17 November
Brazilian regulators warn of 111.8 per cent increase in online credit and debit cards fraud
extra.globo.com, 1 November
Financial stability & regulatory
ECB warns against premature end to public aid
The European Central Bank (ECB) stated in its last report on financial stability that a sudden end to government funding could entail a worse economic downturn than in the first wave of the coronavirus. Many SMEs now find themselves highly reliant on such funding after finding themselves in debt after the first wave, moneyvox.fr reports on 25 November.
New Development Bank to donate $3bn to boost Brazilian economy affected by coronavirus crisis and infrastructure investment
brazil247.com, 19 November
Indigenous Amazon communities launch cryptocurrency to help native communities impacted by economic crises as a result of coronavirus
brazil247.com, 13 November
World Bank to lend Brazilian government BRL 1.2bn to aid families affected by the pandemic
terra.com.br, 30 October
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