In the wake of disruption, such as COVID-19, banks, capital markets, insurers and wealth and asset managers not only need to respond now, but also prepare for what’s next and beyond. Access on-demand replays of our presentations tackling the challenges, implications and opportunities the financial services industry is facing as a result of COVID-19 and the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The series is hosted by Brian May, Americas Accounts Managing Partner, Financial Services, Ernst & Young LLP.
Reflecting on the CARES Act from the standpoint of 30 days following its enactment, we have seen the Federal Reserve and the Treasury achieving significant economic leverage based on trillions of dollars of stimulus made through SBA PPP loans, municipal lending facilities, and other special purpose vehicles. Yet all of these facilities come with significant oversight and compliance requirements.
Next, we expect continued legislative support with the release of additional stimulus through existing and new vehicles. Banks will move toward helping clients with forgiveness of PPP loans along with the establishment of the Main Street Lending Programs for SMBs.
Beyond, financial institutions are focusing intently on credit exposures, capital and liquidity positions, and risk management postures associated with loans and sectors impacted by the economic crisis. The quality and extent of economic forecasting and legislative planning will be essential in these efforts. Also, considering the extent of stimulus oversight expected over the coming years, we continue to stress the importance of exemplary compliance and audit capabilities.
For more insights on the financial services impact of the pandemic - what was then, what is now and what to expect tomorrow, please click here.
The health crisis of COVID-19 is being followed by credit, market and liquidity crises in the mortgage industry. Each sector of the marketplace has its own set of challenges, causing major disruptions throughout the value chain, from borrowers and servicers to investors and lenders:
- The rapid onset of unemployment has put severe pressure on mortgage holders.
- Servicers are bearing the brunt of the industry crisis. In operations, their reduced-capacity workforces must engage intensely with overwhelming customer volumes. Financially, servicers face an estimated $75 to $100 billion cash crunch in uncollectable principal and interest owed to investors in agency securities.
- Investors have seen losses from volatile credit risk spreads
- Mortgage lenders with tightened standards and revitalized digital operations have benefitted from a wave of refinancing from record-low interest rates, however non-bank lenders reliant on the capital markets face serious liquidity issues.
As we saw in the 2008 financial crisis, the participants in the U.S. mortgage industry are deeply intertwined, and as one-quarter of U.S. GDP, the industry is highly important to our future.
Find out more about the risks the housing finance and mortgage industry is facing now, next and beyond by clicking here.
Despite the challenges of COVID-19, the wealth and asset management industry has held its own, and in this video, sector leaders from Ernst & Young LLP (EY US) offer key insights on governance, market opportunities and focus areas for industry practitioners.
In asset management, the initial focus has been on managing risk, with funds conducting more frequent liquidity analyses, valuations and stress tests. These are crucial activities from both funding and tax standpoints, especially for investment managers considering the purchase of distressed debt. Also, we outline the relief provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which, despite their short-term cash flow benefit, may carry significant long-term reputational risks for financial brands.
In wealth management, the COVID-19 crisis has underscored the core value proposition of human financial advisors who are now providing customers with solid investment guidance, timely advice on tax matters, and hands-on help navigating the various options for accessing liquidity and relief facilities. Firms are also establishing cybersecurity for work-at-home employees, mitigating new risks involved with third-party vendors and streamlining operations with fully digital solutions.
To get more insights on this topic, click here.
The dynamic environment and tremendous uncertainty surrounding COVID-19 have led to rapid changes in regulations and business practices for insurers. How will the insurance industry navigate “Now, Next and Beyond” and emerge from the crisis?
The industry has navigated the early days of the crisis well and made a very fast pivot to “work from home” and are readily preparing for the “return to work” as the crisis slowly subsides. The CARES Act, regulatory changes, and the scope of insurance protection provided currently and in the future present both opportunities and challenges. The industry has really stepped up in providing much needed support to customers and agents and are helping policyholders by activating their purpose. What’s next and beyond? And what stories will the world’s most successful insurance franchises tell about how they navigated the crisis five years from now?
The CARES Act: What you need to know
The U.S. Government has developed the US$2 trillion The U.S. Coronavirus Aid, Relief, and Economic Security (CARES) Act to provide the health care resources needed to fight COVID-19.
Tax in the time of COVID-19
Businesses are navigating a myriad of issues related to the COVID-19 pandemic. As the US works to stabilize its economy, tax will play a significant role.
Paycheck Protection Program Loan Forgiveness Platform
As lenders face record demands surrounding forgiveness requests under the CARES Act, EY has developed an intuitive and educational platform using Microsoft Azure and Power Apps Platform that supports both banks and borrowers as they navigate through the lending journey.