Nearly all businesses in the financial industry are currently being affected by the coronavirus pandemic. It is difficult to assess the long-term impact of this global pandemic, but the short term impact is easily seen throughout the world. Stock market crashes and consumer uncertainty is beginning to take its toll. When the market is still volatile, fewer businesses are willing to operate normally and that is having a significant effect on the local communities as well.
Still, not all of the affects are as bad as the media makes it out to be. In fact, there are many positives that investors should be focusing now to profit in the long term.
With that being said, we are going to take a look at some of the ways coronavirus is affecting the financial industry:
Lower Interest Rates- central bank interest rates are falling and it reduces the interest rates of savings account that banks rely on to attract new customers and drive more deposits. Across the globe, central banks are cutting interest rates to cushion national economies against the threat of coronavirus. This will surely put pressure on banks that have plenty of high-yield savings accounts. Some banks may decide to maintain higher interest rates, but suspend the opening of new accounts to limit expenses.
Higher Short-Term Loan Activities- many consumers are furloughed or have lost their jobs. The lack of income drives short-term loan activity for basic necessities, such as food and utilities. Millions of households are still living paycheck to paycheck. Many people must be present physically in their workplace to earn money. Voluntary or forced stoppages in business activities will prevent them from earning an adequate income. They need immediate solutions to meet their financial obligations. This situation will result in a spike in credit union and small loans.
Financial Assistance Programs- it’s the opportunity for banks to generate goodwill with their clients and businesses in the area. Consumers require financial assistance due to the current pandemic. Lower demands for products and forced closures of business activities significantly reduce or completely eliminate income for many. It is crucial for banks and financial organisations to help local businesses to weather the storm.
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