The impacts of the COVID-19 crisis have come on top of a combination of persistently low interest rates, regulatory changes, and competition from shadow banks and new digital entrants that have challenged the traditional bank business model over the past decade.
In the future, banks will have to deal with the fact that the crisis will dramatically increase non-performing loans, although with temporary relief from strict regulations and with massive liquidity help from central banks. Restructuring in the sector will accelerate. An open question is whether surviving incumbents will move ahead or if powerful new players - such as Big Tech - will enter the sector with force, transforming the incumbents.
This will be a presentation of the second report in the CEPR/IESE series on the Future of Banking, which tackles these crucial issues, examining the competitive responses of the different players – both incumbents and new entrants – and the associated policy and regulatory issues.