Millions of employees have lost their jobs and cannot pay their credit cards. Restaurants and shops are only slowly reopening; many cannot pay their rent. Industrial companies can’t make payments on their equipment leases. Landlords have less income and cannot keep up with their mortgages. Suddenly, the world is awash in credit risk. Our new research shows how banks are tending to a radical surge in demand for one of their most ancient practices: measuring and monitoring credit risk. Leading banks are deploying a new configuration of sector analysis, borrower resilience, and high-frequency analytics. They are moving past sectoral analysis to take subsector views of the probability of default (exhibit). Some are going even deeper, to understand what’s happening in the financial life of their borrowers.Like credit risk, supply chains have experienced intense disruption. This week, the McKinsey Global Institute looked at the effects not only of COVID-19 but of all manner of...
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