Financing the covid crisis


Banks were the villains of the 2008 financial crisis, but are they potentially the heroes of the COVID-19 crisis? Over time, will banks and other sources of finance, take over? How will they work with government? This session will explore the role of the financial sector in helping the economy to recover.

Sergio P. Ermotti, Group CEO, UBS Group AG, was in conversation with Tim Jenkinson Professor of Finance, Saïd Business School.


Sergio P. Ermotti, Group CEO, UBS, spoke to Tim Jenkinson, professor of finance, Saïd Business School about the role of banks and the financial system in the covid-19 crisis. 

The discussion focused on the impact of the pandemic on the financial system and the broader economy, and the speakers explored how the impact of the crisis is likely to accelerate economic transformation. 

Ermotti said that he believed there was further room for fiscal policy expansion but that policymakers needed to be strategic about their support, noting that many businesses were already stressed entering the crisis. 

He was sceptical about the idea of governments taking equity stakes in businesses, suggesting that writing off loans would be a better means of support than political interventions in the private sector. 

Jenkinson and Ermotti discussed resilience, with the professor asking whether banks would assess risk differently in the future, including exploring questions such as whether lacking a digital channel constituted a business risk. 

Ermotti expects that deglobalisation would accelerate, as, alongside the need for digital channels, businesses anticipated changes to supply chains to ensure they could continue to get access to the inputs they need. 

While banking stress tests did not cover the specific risk of a pandemic shutting down the global economy, the modelling covered rate cuts, severe drops in equity markets and stress on credit which 'de facto' mapped the scenario, Ermotti said. 

The UBS Group CEO said there was a 'total disconnect' between the stock market rally and the real economy. 'Credit markets and bank stocks are probably a better indicator of what the market and the broader investment community thinks about the future,' he said. 'I am surprised,' he added. 'It is way too quick, the rebound.' 

The discussion turned to the bank’s own future, and the CEO said that while technology may cannibalise some elements of the value chain but also helps to increase efficiency and effectiveness, personal advice and helping clients navigating the crisis remains essential. Digital conferences had seen three times more clients attending, Ermotti said.