As the COVID-19 pandemic continues, we are seeing positive signs, with vaccines being administered to some of the world’s most vulnerable communities and promises for broader rollout over the next several months. However, the full economic and financial impacts have yet to be felt, due to the US government’s fiscal stimulus, mandatory deferrals and forbearances, zero payments on student loans, the additional $300 to $500 spending ability of tens of millions of consumers, and suspension of traditional troubled debt restructuring accounting for loan modifications. Credit risk management should focus on four areas:

  • Default rates of borrowers
  • The quantification of credit risk given data inconsistencies and government support programs
  • Diminished loan growth and payment transaction volumes
  • Relocation of capital to environmental, social, and governance commitments that are net positive to societies

Read the full paper from Joseph Sergienko and Charles Trunz.