Microsoft Word - instructions MID SEMESTER ASSIGNMENT.docx AFIN8003 MID SEMESTER ASSIGNMENT (25%) TOPIC and RESOURCES Instructions: Write a 1500-word (+/- 10%) report in your own words, answering the...

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Answered Same DaySep 10, 2021AFIN8003

Answer To: Microsoft Word - instructions MID SEMESTER ASSIGNMENT.docx AFIN8003 MID SEMESTER ASSIGNMENT (25%)...

Sumit answered on Sep 10 2021
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Introduction: The COVID-19 was declared a Global pandemic by the World Health Organization on the 11th March, 2020, since then the COVID-19 has impacted the financials of each and every person in the world, be it any Individual, Organization or any Banking Institution. At the start of the COVID-19 many people compared it to the financial crisis of 2008 and 2009 (25 years Investment Week, March 2020). The financial crisis of the 2008 was due to the fall of the housing market in The United States of America but the COVID-19 has not only affected the financials around the world, the virus has restricted movement and travelling around the world due to which the demand is at all time low. Hence the effects of the COVID-19 are more like the crisis in 1919 and might have a long-term effect and not a V shaped recovery. Decreased productivity and lockdowns have already started to take a toll on the financials of the corporate sector. Supply chain disruptions, manufacturing hindrances and crippled health systems need a hefty public fund/stimulus to continue operations smoothly. Income from tourism, entertainment sectors among many others has already crippled the economic situation. Factors like these are all adding up to strain the global economy which might also have its repercussions in the year ahead.
Body: The Banks are affected by the virus heavily due to the reduced demand in the market, the demand for new loans from the banks has reduced (Deloitte, March 2020). The major reason for this is the lockdown and the decreased productivity which has impacted the financials of the company. Due to COVID-19, the demand in several factors has been affected badly and many companies has either reduced the productivity or has stopped their operations and productivity all together. The major industries which has been affected is the Tourism and the Entertainment sector which has taken the major toll and the demand from these sectors has been reduced to zero. This has impacted the profitability of the banks, since the main source of profit for the banks is to earn money through interest earned on loans provided by the banks. The Central banks around the world has responded to this risk by reducing the interest rate in the countries so that the demand can be raised and the banks can issue more loans and earn interest from the loans.
The next major risk being faced by the company is high risk of default (Deloitte, March 2020) that the banks will face due to the COVID-19 outbreak. The default refers to the non-payment of installment amount due to the bank. Since the major portion of loans are taken by the corporates and the salaried class and both of which are facing tough times due to the COVID-19 in either loss of business or loss of job, the banks around the world are facing the risk that the borrowers will not be able to pay the installment...
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