Impact of coronavirus on operational risk: ORX News round-up

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.

Heightened risk

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

Heightened risk

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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