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“The FS industry, like all other sectors, has been profoundly impacted by this crisis. The industry has met its own challenges with its people and operations. But it also is a sector that provides key services to the economy. Those services, whether banking, insurance or asset management will be critical in enabling the economy to navigate through the crisis. It is critical now that the FS sector focuses on the current and future needs of its customers to allow the economy to emerge from the crisis in the best shape possible.
In dealing with the impact of COVID-19 on its own businesses the FS sector’s ability to achieve a swift and largely effective operational switch has been impressive. But it’s also clear that few institutions had built a pandemic and economic downturn of this global scale into their business continuity planning. So organisations are having to respond decisively and swiftly as they assess what’s working, what needs improvement and how to safely adapt. The quicker businesses can get operations back to some sense of normality, the better they will be able to respond to the needs of their customers, while gradually extending service and support across the market.”
The shift in sentiment is reflected in projected falls in business volumes and returns. Banks and building societies also expect to see a continued rise in non-performing loans.
Important to ensure there are sufficient resources to support key workers, vulnerable customers and distressed businesses. As the ‘new normal’ remote operations are stabilised and strengthened, organisations can progressively move back to something as close as possible to business as usual.
Effective digital connectivity and security are essential in enabling staff to work as effectively as possible from home. They also need clear communication and support from supervisors as they deal with the potential stresses of a new and unfamiliar working environment.
FS organisations expect to see a slight increase in operating costs over the next quarter. Systems investment will continue to increase over the next 12 months.
Banks’ and building societies’ confidence about their outlook for the next three months fell in Q1 2020,. As the bulk of the responses came before the full lockdown was imposed, sentiment may have dipped further since.
Banks anticipate only marginal falls in business volumes and returns over the coming quarter, but building societies are looking ahead to more marked declines. Both expect to see a continued rise in non-performing loans.
As the lockdown continues and unemployment rises, banks have a critical role to play in helping our society steer through these difficult times.
This vital support includes special assistance for key workers, vulnerable people and clients facing financial difficulties, while responding to a surge in demand from distressed customers facing loan and mortgage arrears.
Many banks and building societies are also seeking to ease the strains on the wider population through steps such as increases in credit limits, repayment holidays and waiving fees on overdrafts and late credit card payments.
The immediate challenges include reassigning staff to meet swings in demand. The most operationally agile and digitally advanced institutions are clearly at an advantage. Staff can work remotely in the most efficient and productive way. Digital self-service processes can also take care of many routine client demands, allowing staff to spend more time caring for vulnerable and financially distressed customers.
Insurers are anticipating a difficult quarter ahead. General insurers expect to see a steep fall in returns over the next three months. They also expect a significant rise in the value of claims over the coming year. The downbeat mood among life insurers is even more marked, reflecting the market uncertainty.
Through close support for life and pensions customers facing market uncertainty and dealing efficiently with coronavirus (COVID-19)-related claims, insurers can deliver in these key moments that matter. They can also lay the foundations for much deeper and more enduring customer relationships.
Operational agility and well-developed digital capabilities can help to accelerate the switch to remote working and bolster support for customers in most pressing needs.
Insurers are planning significant increases in systems investment over the coming year. This can not only help to control costs, but also strengthen customer engagement in the absence of face-to-face channels.
While the bulk of the responses came before the full lockdown was imposed, the survey suggests that investment managers already recognised the scale of the challenges ahead. The shift in sentiment is reflected in significant projected falls in business volumes and fee income over the coming three months.
Investor and regulatory scrutiny of investment managers’ ability to deliver fair outcomes and value for money has been heightened by the current market uncertainty.
The emergency is also putting ESG under the spotlight. Immediate priorities include supporting the economy as businesses and jobs come under threat. In the longer term, the lessons from the emergency could increase attention on other threats including climate change. Just under half of the investment managers in the survey are actively managing climate change risks.
Investment managers also plan to step up systems investment over the coming year. Boosting digital capabilities could help to reduce costs and sustain margins as fee income comes under pressure.