Start of August: Weekly roundup 31 July 2020

This week continued to feel a quieter week and being the last week of July, the news cycle slowed somewhat. Here are the key stories this week.

It has been reporting week for the banks and most have posted significant increases in reserves for losses due to loan arrears and write-offs. At Lloyds was an eye-watering £3.8 billion however, the pattern was also replicated at Barclays and Santander. Interestingly it also appears 65% of payment holiday arrangements have been rolled over too. All is this is an indication of yet more difficult times to come for many customers and pointing to a wave of volumes of customers in arrears. (the increase in rent arrears advice also an early indicator)

With the furlough scheme due to end in October and covering 9m people, reported projections are pointing to a 10% unemployment rate when it finishes. It is looking increasingly likely regional lockdowns will complicate the picture will be further too, with more restrictions in and around Manchester on Friday.

Different views on when and how to return to the office are clearly starting to emerge. RBS is saying stay at home, with Barclays wanting people back. Undoubtedly real estate is being looked with some of us clearly happy to continue to work at home. It is however not for everyone with many people desperate to return to the office for some respite (always worth remembering).

Ofcom this week released their guidance on vulnerable customers. It is interesting how the various industries are starting to align, and at increasing speed too.

The pressure on fin-tech, noted before, crystallized a little with a note of concern from Monzo on how COVID has impacted their business model and revenue streams. This is not a great headline for all account holders. Monzo likely need to be very careful with the headlines, consumers funds are largely protected as a bank, but customers becoming uncertain and moving money really will not help either. (on an entirely unrelated thought… think how quickly a bank run could happen online)

We have been having a discussion on the impact of COVID on predictive credit risk models (including credit bureau scores etc) for a while, however we are not alone. In the financial markets, where sophistication is greater and AI is more widely used, they are having trouble keeping up too. History is not a good predictor of the future when you have unique black swan events happening it seems..!

Lastly a couple of other interesting stories

Some things to think about this week. Have a good weekend everyone…. @chris_w_tweet

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