ppi 201502ZU4645
Esta publicación científica en formato digital es continuidad de la revista impresa
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197402ZU34
Instituto de Estudios Políticos y Derecho Público "Dr. Humberto J. La Roche"
de la Facultad de Ciencias Jurídicas y Políticas de la Universidad del Zulia
Maracaibo, Venezuela
Vol.39 N° 68
Enero
Junio
2021
The Financial Implications of the
Coronavirus COVID-19 Pandemic:
A Review
DOI: https://doi.org/10.46398/cuestpol.3968.20
Ilmir Nusratullin *
Nikolay Mrochkovskiy**
Raul Yarullin ***
Natalia Zamyatina ****
Oksana Solntseva *****
Abstract
The COVID-19 pandemic in 2020 was a real shock to the entire
global community. It hit both the health systems of the infected
countries and the economies. Border closures, quarantines for
citizens and disruption of production caused economic shock to
many organizations. First, the tourism and transport industry
suffered, followed by agriculture and mining, and then all other industries.
However, the economic crisis also caused some problems in the financial
sector: increased risks of non-compliance with loans, cash outs of bank
deposits, increased pressure on the insurance market, panic in commodity
and securities markets. The purpose of this study is to examine the impact
of COVID-19 on the financial system of developed countries. As part of this
study, a review of scientific research in the field of pandemics and finances
was conducted, how the spread of infection affected the economy, banking,
financial markets, and government regulation in the financial sector as a
whole.
Keywords: COVID-19; pandemic; finance and pandemic; financial
impact analysis; political economy.
* Bashkir State University, Russia. ORCID ID: https://orcid.org/0000-0001-7810-2945. Email:
nusratullin.iv@gmail.com
** Plekhanov Russian University of Economics, Russia. ORCID ID: https://orcid.org/0000-0001-8453-
3944. Email: mnikos@ya.ru
*** Financial University under the Government of the Russian Federation, Moscow, Russia. ORCID ID:
https://orcid.org/0000-0001-6834-3032. Email: jrr61@mail.ru
**** State University of Management, Moscow, Russia. ORCID ID: https://orcid.org/0000-0001-8184-
6304. Email: zamiatina.guu@gmail.com
***** State University of Management, Moscow, Russia. ORCID ID: https://orcid.org/0000-0001-6810-
8868. Email: osolntse@mail.ru
Recibido el 21/08/2020 Aceptado el 04/02/2021
Cuestiones
Políticas
Vol. 39, Nº 68 (Enero
- Junio) 2021, 325
-342
IEPDP-Facultad
de Ciencias Jurídicas y
Políticas
- LUZ
Ilmir Nusratullin, Nikolay Mrochkovskiy, Raul Yarullin, Natalia Zamyatina y Oksana Solntseva
The Financial Implications of the Coronavirus COVID-19 Pandemic: A Review
326
Las implicaciones financieras de la pandemia de
coronavirus COVID-19: Una revisión
Resumen
La pandemia de COVID-19 en 2020 fue un verdadero shock para toda
la comunidad mundial. Golpeó tanto a los sistemas de salud de los países
infectados como a las economías. El cierre de fronteras, las cuarentenas
para los ciudadanos y la interrupción de la producción provocaron un shock
económico para muchas organizaciones. En primer lugar, la industria del
turismo y el transporte sufrió, seguida de la agricultura y la minería, y
luego de todas las demás industrias. Sin embargo, la crisis de la economía
también provocó ciertos problemas en el sector financiero: aumento de
los riesgos de incumplimiento de los préstamos, salidas de efectivo de
los depósitos bancarios, aumento de la presión en el mercado de seguros,
pánico en los mercados de materias primas y valores. El propósito de este
estudio es examinar el impacto de COVID-19 en el sistema financiero de los
países desarrollados. Como parte de este estudio, se realizó una revisión de
la investigación científica en el campo de la pandemia y las finanzas, cómo
la propagación de la infección afectó a la economía, el sector bancario, los
mercados financieros y la regulación gubernamental en el sector financiero
en su conjunto.
Palabras clave: COVID-19; pandemia; finanzas y pandemia; análisis de
impacto financiero; economía política.
Introduction
The COVID-19 pandemic in 2020 has led to serious social, economic,
and political crises. Since its appearance, the COVID-19 virus has become
not just a large health problem, but a cause of change in people’s ways of
life. In December 2019, the virus was recorded in Wuhan (Hubei Province,
China), and in a few months, it had spread to all continents (Huang et al,
2020). As of September 30, 2020, about 33.6 million infections, 1 million
deaths were recorded worldwide (Google news, 2020).
The relevance of this study is that the COVID-19 pandemic is not the
first serious problem of a similar level that humanity has faced in recent
decades, for example, an outbreak of H1N1 in 2009, polio in 2014, Ebola
in West Africa in 2014, Zika in 2016 and Ebola in the Democratic Republic
of the Congo in 2019 (Allocati et al, 2016). Later, on January 30, 2020,
the WHO announced the sixth public health emergency of the 21st century
– COVID-19. These worldwide outbreaks have caused a large number of
deaths, diseases and cost billions of dollars (Fan et al, 2019). This suggests
that despite the initial first signals of a possible global pandemic, few steps
have been taken to prepare for it.
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Back in 2018, Bloom, Cadarette and Sevilla (2018) warned of the need
to prepare for possible future pandemics and epidemics in their study. In
their view, pandemics and epidemics will lead to increased costs for the
healthcare system by increasing the costs associated with treating the
infected persons and fighting outbreaks. In addition, a pandemic, according
to Bloom, Cadarette and Sevilla (2018), will contribute to social distancing,
disruption of economic ties, a decrease in production volumes, losses in
tourism, and a decrease in investment activity, all of which ultimately
happened in 2020 because of COVID-19.
Lewis (2001), wrote about the economy during an epidemic; in his
opinion, a pandemic can lead to high healthcare costs, a decrease in national
economic potential and political instability. Bloom and Canning (2004)
argued that epidemics can have significant economic consequences – both
in the short and long term, their management and control will require
significant investments in national and international health systems. The
need for preparing for global pandemics is explained by the fact that they
may incur significant human and economic costs. This study makes a
contradictory conclusion that, on the one hand, the growth of well-being
in countries leads to higher healthcare costs and thereby to preparing for
possible epidemics, and on the other hand, globalization leads to increased
risks of the spread of a future epidemic around the world, rather than only
in any localized territories.
In the same way, Arbeláez-Campillo and Villasmil (2020), also argue
that the ravages caused by the COVID-19 pandemic in the first half of
2020, erode in such a way the foundations of the prevailing world order,
structured since the aftermath of the Second War world, which already
articulates the conditions of possibility for the emergence of a new or
renewed international order with uncertain characteristics.
Tam et al. (2016), wrote on migration issues and their impact on the
economy as a result of future pandemics. Yach, Stuckler, and Brownell
(2006), conducted a study on the impact of the global obesity and diabetes
epidemic on a state’s economy.
The current COVID-19 pandemic, despite the fact that it is only now
in full swing, already has a number of negative consequences for health,
society and the economy:
1. In healthcare. The range of clinical cases of COVID-19 infection
ranges from mild or nonspecific signs and symptoms of acute
respiratory failure, such as fever, cough, fatigue, shortness of breath,
to severe pneumonia with respiratory failure and septic shock, which
are very similar to other coronavirus diseases. More severe forms
of COVID-19 affect older people. COVID-19 is becoming one of the
main causes of hospitalization and mortality, in particular among
Ilmir Nusratullin, Nikolay Mrochkovskiy, Raul Yarullin, Natalia Zamyatina y Oksana Solntseva
The Financial Implications of the Coronavirus COVID-19 Pandemic: A Review
328
middle-aged and elderly people in affected countries (Backer et al.,
2020).
2. In society. Because of the outbreak of COVID-19, in almost every
infected country restrictions have been placed on population
movements from a few weeks to several months. Local and central
administrations around the world have banned the free movement
of their citizens outside of their homes to avoid transmission of the
virus. Various religious, cultural, social, scientific, sporting and
political mass events were canceled. Also, due to the fact that all
family members are constantly together, there is a surge in domestic
violence (Campbell, 2020).
3. In the economy. The COVID-19 pandemic hit the infected countries
economically. In transport; passenger international air, rail, and
auto traffic almost completely ceased due to quarantine measures.
Following the cessation of population movement, tourism-related
sectors (tourism organizations, HoReCa and entertainment) were
affected. Cargo freight suffered less. In addition, educational,
commercial, sports, and spiritual institutions were closed in
countries prone to infection in order to prevent the spread of the
virus through crowds of people. In many countries, restrictions on
mobility have been introduced, and as a result, the public service
sector has practically stopped (Chakrabortya and Maityb, 2020)
As part of this study, the author will conduct a review of research in
the field of the pandemic and finance, how infections generally affect the
economy, the banking sector, the financial markets, and the government
regulation of the financial sector in the pandemic. The topic of the impact
of epidemics and pandemics on the financial system of the country and
the whole world has previously been seldom considered, so there is not
much research in this area. This paper aims to fill this knowledge gap and
formulate approximate directions for further research.
1. Materials and Methods
The research base was taken from scientific studies conducted from
2000 to 2020, which relate to the impact of pandemics on the economy as a
whole, the banking sector, the financial markets, the government regulation
of the financial sector during the pandemic. In addition, the author used
the World Bank’s data (https://datacatalog.worldbank.org/) regarding the
measures taken by different states in the field of finance in order to mitigate
the consequences of the COVID-19 pandemic.
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2. Results
2.1 COVID-19 and the Economic Crisis
An outbreak of a new coronavirus infection COVID-19 was reported in
Wuhan (Hubei Province, China) in December 2019. After hitting China in
February-March, the virus began to spread actively in South Korea, Iran,
Italy, and then in Europe, the USA, and Russia (Sohrabi et al, 2020; Yang
et al, 2020). As of April 24, 2020, about 2.8 million infections, 0.8 million
recoveries, 0.2 million deaths were recorded worldwide as of September
30, 2020, about 33.6 million infections, 1 million deaths were recorded
worldwide (Google news, 2020).
Deaths during epidemics and pandemics have always caused some
irreparable damage to society, but COVID-19 is different as it has immobilized
the entire global economy. In order to limit the further transmission of the
disease in society, many of the affected countries decided to completely
isolate themselves – closing borders (AL JAZEERA, 2020) and society –
self-isolation regimes (for example, (GOV.UK, 2020)). Most international
flights were canceled, many local flights and rail transportation were also
canceled, and bus and road connections were limited. Of course, all this
applies to passenger transportation, cargo freight remained practically
unlimited. In almost all countries affected by COVID-19, educational,
scientific, sports and spiritual institutions were closed. The sectors of
tourism and entertainment were hit hard. In countries where the epidemic
is particularly acute, production facilities are temporarily closed. All this
leads to an increase in unemployment and a drop in the income level of the
population, which can subsequently lead to a protracted economic crisis
and recession (Buck et al, 2020).
In (Nicola et al, 2020), analyzing the news reports, the authors identified
the following economic consequences of the COVID-19 pandemic:
- As a result of a global drop in demand from hotels and restaurants,
agricultural prices fell by 20%.
- Disturbance of the commodity exchanges operations due to panic in
commodities’ markets.
- A deficit in the medical and pharmaceutical markets for medical
goods and personal protective equipment due to a sharp jump in
demand.
- High volatility in the oil market due to lower global oil demand and
problems within OPEC.
- High concern from the business community on the situation around
the pandemic, the expectation of a decrease in turnover over the next
two quarters.
Ilmir Nusratullin, Nikolay Mrochkovskiy, Raul Yarullin, Natalia Zamyatina y Oksana Solntseva
The Financial Implications of the Coronavirus COVID-19 Pandemic: A Review
330
- A decrease in production of the chemical industry worldwide by
1.2%.
Thus, a slowdown in economic development is observed, and in countries
particularly affected by the pandemic, economic crises and recession are
possible.
2.2 COVID-19 and the Banking System
In the modern world, pandemics and epidemics do not directly affect
the banking sector, the effect being more indirect:
1. The development of an epidemic leads to an increase in population
spending on healthcare, which leads to a decrease in the size of the
deposits with the banks or can lead to their closures (Leoni, 2013).
This conclusion was made by Leoni by examining the data on the
spread of HIV in developing countries. The population of these
countries is forced to pay for individual treatment at the expense of
cash on deposits. Since HIV treatment is long and expensive, often
people spend almost all of their savings.
2. If people do not have adequate savings for treatment during a
pandemic, they apply for loans from microfinance organizations
and banking institutions, however, repayment of such loans is
associated with great risks, as the situation in the labor market
continues to worsen and people simply do not have money to repay
loans (Lagoarde-Segot and Leoni, 2013).
3. In a banking crisis caused by external unpredictable factors:
natural disasters, global crises, and possibly pandemics (this
factor is not directly considered in the study), banks pursue more
conservative policies in order to restore profitability (Bongini et
al, 2019). However, such policies during a pandemic may, on the
contrary, aggravate the economic crisis, as businesses simply
cannot find money to recover, and then through a contagion effect,
unemployment increases, individual deposits with banks decrease,
risks associated with lending increase, and bank profitability takes
an even further drop.
Thus, a pandemic affects the banking sector through the emerging
economic crisis. The termination of business cooperation due to the closure
of borders, the shutdown of production facilities and services due to
quarantine measures, and an increase in healthcare and medical treatment
costs lead to a drop in profit for the business community and in the income
of the population. In addition, both the business and the public begin to
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spend their own savings. All of this leads to increased risks in the banking
sector and an outflow of capital from banking institutions.
2.3 COVID-19 and the Insurance System
The pandemic has placed a heavy burden on the insurance system,
especially on both the public and private health insurance systems. Local
epidemics and pandemics are not capable of causing catastrophic failures in
the insurance system, as there is global reinsurance (Tamura and Sawada,
2009). However, studies regarding the impact of the global pandemic on
the global insurance system have not yet been conducted; this may be
interesting for further studies.
Specifically, for the global insurance system, COVID-19 has become a
kind of stability test, one will be able to find out later how successful it was.
2.4 COVID-19 and the Stock Market
Stock market quotes are affected by both current speculative factors
and fundamental factors, including those that are difficult to predict. The
impact on the stock markets from political events was studied by Bash and
Alsaifi (2019) and Shanaev and Ghimire (2019), from natural disasters, for
example, by Kowalewski and Śpiewanowski (2020), from environmental
disasters, for example, by Alsaifi et al. (2020) and Guo et al. (2020).
There are also some studies on the impact of pandemics on stock
markets, for example:
1. Acute Respiratory Syndrome (SARS)outbreak (Chen et al, 2007).
2. Ebola Virus Disease (EVD) outbreak (Ichev and Marinč, 2018).
The results by Al-Awadhia et al., (2020) who studied the effects of
COVID-19 on the stock market, are interesting. The results of the study
indicate a significant negative effect from the pandemic on all companies
included in The Hang Seng Index and Shanghai Stock Exchange Composite
Index. It should be noted that some sectors of the economy showed positive
results during the outbreak of COVID-19, namely: IT and pharmaceutical
companies.
In general, studies of the impact of pandemics on stock markets are
inadequate; there are studies of the effects of natural disasters, technological
disasters, terrorist attacks, and armed conflicts. However, all these studies
are local in nature, and COVID-19 is different, being global in nature.
Therefore, its impact on the stock market can be better compared with
global economic crises.
Ilmir Nusratullin, Nikolay Mrochkovskiy, Raul Yarullin, Natalia Zamyatina y Oksana Solntseva
The Financial Implications of the Coronavirus COVID-19 Pandemic: A Review
332
2.5 COVID-19 and the Stock Market.
The COVID-19 pandemic is global. However, as many countries have
chosen to isolate and have closed their borders, these countries are now
fighting against the virus in the financial markets on their own. Next,
consider the responses of China (Table 1), the USA (Table 2) and Russia
(Table 3) in the financial market to the COVID-19 pandemic.
Liquidity/funding
The medium-term lending
rate was reduced by 10
basis points and amounted
to 4.050%; 200 billion
yuan (0.2 percent of gross
domestic product) were
injected into the economy
through the medium-term
lending facility.
Since February 3, RMB 2.8
trillion was injected through
open market operation,
although most of it was later
withdrawn.
The re-lending and re-
discount facilities were used
to support SMEs (RMB
500 billion); the re-lending
interest rate was reduced and
amounted to 2.5 percent.
A re-lending program
totalling RMB 300 billion
was specially designed for
enterprises affected by the
pandemic, at a rate of 1.3
percent, subsidized by the
Ministry of Finance.
The 7-day reverse repo
rate was reduced by 20 basis
points, to 2.2%.
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The required reserve
ratio (RRR) was reduced by
0.5 percent for rural credit
unions, rural, commercial
and cooperative banks, and
also for city commercial
banks operating exclusively
in provincial-level adminis-
trative regions. It was one of
the two planned reductions of
0.5 percent each.
The medium-term lending
rate was cut to 2.95%.
The excess deposit reserve
rate was cut from 0.72% to
0.35%.
Table 1. China’s Response to the Development of the COVID-19
Epidemic in 2019-2020
Source: (The world bank group, 2020).
China’s reaction to the development of the COVID-19 epidemic can
be divided into 2 parts: the first is support for financial institutions and
regulation of their activities, the second is support for liquidity and pumping
money into the economy.
Financial institutions
Liquidity/funding
The composition of capital was
changed to comply with Pillar 2
requirements: credit institutions
received the right to partially use capital
tools not qualified as CET1 capital (a
measure earlier scheduled to enter into
force in January 2021). It was expected
that banks would use the positive
impact of these measures to support the
economy, not to increase dividends or
variable compensation.
The Federal Reserve Board
introduced temporary changes to its
leverage ratio requirements to reduce
tension in the treasury market caused
by the pandemic and improve banks’
abilities to provide loans to individuals
and businesses.
The interest rate target range was
reduced from 1.00–1.25% to 0.00–
0.25%.
The primary credit rate of the
discount window was reduced from
1.75% to 0.25%.
Interim USD liquidity arrangements
(swap lines) with nine countries
(Australia, Brazil, Denmark, Norway,
Mexico, Korea, New Zealand, Singapore,
and Sweden) were announced.
Within the framework of the
quantitative easing policy, the Federal
Reserve announced purchases of US
treasuries (USD 500 billion) and agency
mortgage-backed securities (USD 200
billion).
Ilmir Nusratullin, Nikolay Mrochkovskiy, Raul Yarullin, Natalia Zamyatina y Oksana Solntseva
The Financial Implications of the Coronavirus COVID-19 Pandemic: A Review
334
Since the second quarter of 2020
and until the end of December, a bank
having a leverage ratio of 8% or more
and complying with some additional
criteria can use the community bank
leverage ratio rules. For community
banks, these rules will be in effect
until January 1, 2022, before the
requirement for the community bank
leverage ratio requirement is again set
at more than 9%.
A revised statement was issued
concerning the interaction between
the interagency statement of March 22,
2020 and the temporary aid provided
by Section 4013 of the Coronavirus
Aid, Relief, and Economic Security Act
signed on March 27, 2020.
The Securities and Exchange
Commission announced that financial
organizations taking advantage of the
Coronavirus Aid, Relief, and Economic
Security Act provision allowing the
deferral of implementation of two
Generally Accepted Accounting
Principles (GAAP) would not violate
GAAP.
Temporary exemptive relief was
ensured for business development
companies that obtained the possibility
to additionally invest in small and
medium-sized businesses.
Capital rules were changed to
compensate for the regulatory capital
impact of participating in the Federal
Reserve’s Paycheck Protection Program
(PPP) since no market or credit risk is
associated with PPP loans.
The Federal Reserve Board, Federal
Deposit Insurance Corporation,
and Office of the Comptroller of the
Currency announced a temporary
regulation to encourage lending
through the PPP, specifying that a zero
percent risk weight should be applied
to loans covered by the PPP for capital
purposes.
The Federal Reserve cut the
discount rate by 150 basis points with
a simultaneous increase in the lending
term to 90 days.
The required reserve ratio was
reduced to zero.
The programs launched during
the Global Financial Crisis were re-
introduced, in particular, the
Commercial Paper Funding Facility,
as well as the Primary Dealer Credit
Facility, allowing for more aggressive
lending over a longer horizon at the
discount rate.
The Federal Reserve also introduced
large-scale repo operation with
increased terms – one-month and
three-month tranches. This could result
in additional liquidity of USD 5 trillion,
although the actual increase has been
much less so far.
An amendment to the Federal
Reserve Act was proposed, according
to which the Fed would receive the
right to buy municipal bonds in certain
circumstances.
A new repo facility for foreign and
international monetary authorities
(FIMA) was introduced. This facility
made it possible for monetary
authorities having accounts at the
Federal Reserve Bank of New York
to conclude repurchase agreements
with the Federal Reserve, temporarily
exchange their U.S. Treasury securities
for U.S. dollars and then ensure access
to these funds for institutions in
their countries. This facility has been
available since April 6, 2020 and will be
in effect for at least six months.
The Paycheck Protection Program
Liquidity Facility was created to
extend credit to financial organizations
originating PPP loans.
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The Federal Reserve announced
readiness to provide four-year loans
through banks to enterprises with
up to ten thousand employees and to
extend loans directly to states,
counties, and cities to help them deal
with the pandemic. This measure
required about $2.3 trillion.
The Securities and Exchange
Commission in its statement underlined
the significance of robust disclosures
and reporting during the pandemic.
A rule change was introduced to
improve the effectiveness of the Small
Business Administration.
The Federal Reserve Board
temporarily modified rules concerning
the PPP to enable certain banks and
shareholders to apply for PPP loans for
the needs of their small businesses.
The Main Street Lending Program
was introduced to provide credits to
SMEs with the purchase of up to $600
billion in loans.
The scope and scale of the Primary
and Secondary Market Corporate
Credit Facilities, as well as the Term
Asset-Backed Securities Loan Facility,
were extended.
The Municipal Liquidity Facility
was established, providing up to $500
billion of loans to municipalities and
states.
Table 2. The USA’s Response to the Development of the COVID-19
Epidemic in 2020
Source: (The world bank group, 2020).
The US reaction to the development of the COVID-19 epidemic can
also be divided into 2 parts: the first is support for financial institutions
and regulation of their activities, the second is support for liquidity and
pumping money into the economy. In addition, the US is actively subsidizing
businesses and the public during the pandemic.
Ilmir Nusratullin, Nikolay Mrochkovskiy, Raul Yarullin, Natalia Zamyatina y Oksana Solntseva
The Financial Implications of the Coronavirus COVID-19 Pandemic: A Review
336
Financial Institutions
Financial
Markets
Liquidity/
funding
Payment
systems
For consumers affected by the
coronavirus, the Central Bank of
Russia (CBR) enabled banks and
microfinance organizations to
restructure the loans of consumers
affected by the pandemic, abandon
penalties, and avoid foreclosures
on collateral.
The CBR expanded its
refinancing program for loans to
SMEs. The tool aimed at limiting
interest rates for borrowers was
complemented with a new tool with
a refinancing limit of 500 billion
rubles to maintain lending to
SMEs. For both tools, from March
23, 2020, the CBR interest rate was
established at 4%.
-For loans refinanced under the
previously existing limit of RUB
175 billion, CBR rate was reduced
from 6 to 4percent, the final loan
rate for the borrower should
not exceed 8.5percent, while all
industry restrictions on lending to
SMEs are lifted.”
The CBR plans to implement
temporary regulatory forbearance
measures (through September
30, 2020), which will allow banks
to maintain flexibility in loan
classification in the most affected
sectors such as transport and
tourism.
The CBR plans to implement
temporary regulatory forbearance
measures (through September
30, 2020), which will allow banks
to lower risk weights on loans to
companies in the medical and
pharmaceutical industries.
Guaranteed the possibility
deferral payments on loans for up
to six months for citizens/SMEs in
difficult economic situations related
to the coronavirus pandemic.
The CBR
started
selling
FX on the
market for
the first
time in
five years
to lower
market
volatility
and
suspended
daily
purchases of
FX for state
reserves
for 30 days
to relieve
downside
pressure on
the ruble.
Policy rates
were reduced by
25 basis points
to 6% on 02-07-
2020
On March
19th CBR
announced
daily sales
of FX on the
open market,
related to the
sale of CBR’s
50percent
equity stake in
Sberbank to
the National
Wealth Fund.
Initially, this
deal was
supposed to
result in sale
of approx.
USD45 bln on
the local FX
market evenly
spread over 3-7
years, however,
the sharp
deterioration
of the global
market
conditions
have lowered
the value of the
equity stake
in question to
approx. USD25
ban and led to
a prompt
action.
In order
to simplify
online
money
transfers
between
individuals,
CBR sets the
limit value of
commissions
charged by
banks from
its customers
for transfers
between
individuals
from May 1,
2020.
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The CBR introduced some
additional measures, which
included allowing credit
institutions to use assessments
made as of January 1, 2020 for
balance sheet assets and loan
loss provisioning; this measure
concerned loans classified under
Quality Categories I and II.
Credit institutions received
the opportunity to apply for risk
premiums when restructuring loan
debt from March 1 to September
30, 2020, as well as apply previous
(lower) premiums when calculating
risk ratios.
The Bank also announced that
it would implement Basel III
standards early for retail lending.
The scope of support programs
for SMEs was extended. In
particular, (1) the calculation of
debt limits was revised, and (2) the
in-person requirement for SMEs to
obtain loans related to supporting/
maintaining employment was
relaxed. The latter change was in
effect from April 6 through July 1,
2020.
Measures were taken to simplify
loan restructuring. Banks were
allowed to assess
their financial condition, the
quality category of loans, and the
quality of debt servicing as of March
1, 2020. This measure concerned
all activities not specified in the
previous CBR decisions. The CBR
also announced its intent to reduce
deposit insurance premiums from
0.15% to 0.1% by the end of the
year.
Table 3. Russia’s Response to the Development of the COVID-19
Epidemic in 2020
Source: (The world bank group, 2020).
Ilmir Nusratullin, Nikolay Mrochkovskiy, Raul Yarullin, Natalia Zamyatina y Oksana Solntseva
The Financial Implications of the Coronavirus COVID-19 Pandemic: A Review
338
Before the COVID-19 pandemic, the Russian economy and financial
system were already under serious pressure (economic crisis and sanctions,
see Nusratullin et al, 2020a; Nusratullin et al, 2020b). But Russia has
responded quite successfully to the COVID-19. Russia’s reaction to the
development of the COVID-19 epidemic can be divided into 4 parts:
1. Support of financial institutions and regulation of their activities
(stimulating the restructuring of debts for small and medium-sized
businesses, introducing the possibility of tax holidays).
2. Regulation of the foreign exchange market seeking to ease the
pressure on the national currency (Ruble).
3. Supporting liquidity by pumping money into the economy.
4. Stimulation for electronic transfers, reducing cash operations.
Since not enough time has passed, the effectiveness of these measures
is difficult to assess. All these measures are more about regulation of the
financial sector during periods of serious global economic crises. This is
understandable, since humanity at the present stage of development, this
is the first time that modern society has met a global pandemic face to face.
Conclusion
The COVID-19 pandemic has shown that it can harm the global economy
on an unprecedented scale. Unlike natural disasters, terrorist attacks,
technological disasters and other factors of economic destabilization, the
epidemic is global. The damage that COVID-19 brought and will bring
remains to be calculated. The economy can be restored, but human lives
are gone. The world scientific community is faced with the task of studying
in detail the impact of global pandemics on humanity, including in the
financial sphere, in order to develop an effective mechanism to confront it
and its consequences.
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