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Evaluate how and why Australian banks’ credit risk exposure may be affected by the current COVID-19...

Evaluate how and why Australian banks’ credit risk exposure may be affected by the current COVID-19 pandemic in the foreseeable future. Comment on whether you believe Australian banks have the resilience to weather this challenging episode and why or why not. Your answers should be relevant to banks’ credit risk.

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Answer #1

Banks main objective is to maintain Asset liability management with profitability.

Due to Covid 19, the loan book of major banks is in peril. Corporate loan book looks more risky than retail loan book. Due to lockdown many people have their lost jobs and big corporates have shaggy sales . NPA are expected to u crease. Most banks have decided to raise money to maintain basic ratios like capital adequacy.

With quarter 4 expected a rebound, till then banks are on a slippery floor. Only income which has increased is their trading income which is considered non ooerating income. Banks have increased rate on deposits and trying to fund the existing clients. Banks will come out stronger in q4 due to govt support and return in demand in the expected holiday season.

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