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BLOGS. August 14, 2020

Balance Sheet Risk Management System Optimization Survey

During our recent webinar discussing Balance Sheet Risk Management System Optimization, we polled our audience to learn more about the challenges they are seeing during these turbulent times. Based on participant responses to our survey questions, we learned that banks are indeed seeing challenges managing balance sheet risk as the prevalence of persistently low rates, continuing margin compression and increasing credit losses tangibly impact financial performance. A combined 44% of survey respondents cited persistently low rates and continuing net interest margin (NIM) compression as primary impacts resulting from current market conditions, while a combined 35% indicated that credit losses and liquidity constraints were the most troublesome outcomes. This suggests that low rates, compressed margins and continuing credit losses are here to stay for longer than was anticipated before the crisis. The prospect of negative economic growth and higher indebtedness may translate to even lower interest rates, which of course will lead to further pressure on bank profitability.

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