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S&P Forecasts $2.1 Trillion In Global Bank Credit Losses Over Next Two Years

S&P Forecasts $2.1 Trillion In Global Bank Credit Losses Over Next Two Years



S&P Forecasts $2.1 Trillion In Global Bank Credit Losses Over Next Two Years Tyler Durden Thu, 07/09/2020 - 14:31

Three months ago, when US commercial banks reported a surge in loan losses in Q1 earnings as a result of the covid pandemic, we said that the banks have a "big problem", because while the largest US banks did anticipate a nearly 4x surge in loan losses from a year ago...

... this was nowhere near enough to account for the deluge of total losses that we coming.

However, it now appears that even our pragmatic assessment will end up obliviously optimistic if S&P analyst Osman Sattar is correct.

In a new note published by S&P Global Ratings, the agency correctly anticipates that the COVID-19 pandemic and responses to it will have huge and long-lasting effects on bank asset quality. In fact, across the 88 banking systems S&P Global Ratings covers, S&P forecasts their credit losses will be about $1.3 trillion in 2020--more than double their 2019 level of $0.6 trillion.

And while S&P is optimistic enough to project a strong recovery in 2021, it still expects losses in that year will be a staggering $0.8 trillion, more than one-third above the 2019 level: "Indeed, we expect that 2019 marked the end of a multiyear period of benign credit losses for banks globally", according to Sattar.

Looking at 2020, S&P expects that on a global scale, bank credit cost ratios in 2020 will be around 160 basis points (bps), more than double their 2019 level of 78 bps.

The rating agency estimates this ratio was around 100 bps to 120 bps in the aftermath of the 2008-2009 global financial crisis, which confirms our speculation from April that banks will need to take far, far more loss reserves to catch up to the upcoming dismal reality. Furthermore, current accounting rules require a more timely recognition of credit losses than during the financial crisis. On the other hand, the composition of global lending is more weighted toward developing-market economies (including China) that tend to have weaker asset quality, and that the financial crisis had a more limited effect on loan asset quality in some regions (including Asia-Pacific, for example) than S&P expects to be the case now.

As shown in the next chart, S&P projections for credit losses vary widely among regions, in size and timing of their recognition. Of the $926 billion total increase in credit losses, the agency forecasts over this year and next (from the 2019 level), Asia-Pacific accounts for $518 billion, dominated by $398 billion of losses in China. In large part, this reflects the sheer size of the Chinese banking system in a global context. In terms of customer loans, the Chinese banking system is approximately the same size as the U.S., Japanese, German, and U.K. banking systems combined. Moreover, the banking system in China is relatively much more important in the supply of credit to its economy than the U.S., where borrowers can typically benefit from a deep, liquid, and mature bond market, a large nonbank financial institution sector, as well as access to funding via the banking system. North America's regions account for a further $240 billion of the increase, followed by $120 billion in Western Europe.

These differences can arise for myriad reasons. China was first hit by the outbreak, but this was put under (draconian) control and the economy has improved since the peak in the first quarter of this year. The large loan exposures to state-owned enterprises (which tend to assume some levels of government support) buffer the potential loan quality fallout. Substantial monetary and targeted fiscal stimulus also helped stabilize confidence and contribute to bankers' having an improved view of recovery. Sectorwide, there are substantial loan provisions--about 1.8 times the level of official NPLs. However, this is much lower, at about 50%--once our estimate for forborne loans is included. Banks in China are required to comply with strict regulatory provision standards once these forborne loans migrate to weaker classifications. In addition, some listed Chinese banks must consider IFRS 9 provisioning requirements and apply the higher of the two requirements.

What does all this mean for long-term bank viability?

According to the report, while major banks will be able to absorb credit losses from earnings, they will be left with sharply reduced headroom for further upticks. More from S&P:

We estimate that the top 200 rated banks represent about two-thirds of global bank lending. Pro rata, for 2020 we estimate that credit losses for these banks would absorb about 75% of their preprovision earnings. Under our base case, this ratio improves to about 40% in 2021. By way of comparison, in 2019 the ratio was just 30%. These figures illustrate how the sharp uptick in credit losses, combined with muted earnings from slower economic activity, leaves limited capacity to fully absorb further losses from current earnings.

S&P then notes, that should the COVID-19 pandemic prove to be worse or last longer than its current base case economic forecasts assume, then a combination of higher credit losses and lower earnings will inevitably hit banks across the world.

In particular, S&P economists note that the economic damage associated with the pandemic is nonlinear: If containment of the virus takes twice as long as expected, for example, the economic damage will be more than twice as bad as the length of the recession, with recovery longer and weaker (with more lost output). Moreover, even if the spread of the virus were to end tomorrow, the effects could linger, especially if social distancing becomes a new normal or business and consumer spending doesn't bounce back as people await the arrival of a vaccine.

Meanwhile, even as fiscal measures provide "essential and immediate support to the economy" their eventual withdrawal could reveal new fragilities in asset quality.

As S&P ominously warns, while the unprecedented level of fiscal support that many governments across the world have deployed in response to the pandemic-related slowdown has been a key factor in supporting their citizens and economies during lockdown periods, it is unclear how if ever this support can ever be removed: time will tell whether the size and duration of such support has been effective enough.

"From a bank credit risk perspective, perhaps the greater danger at this time is the reduction of such support too early, resulting in a longer and deeper economic contraction, further impairing banks' asset quality and increasing credit losses." While S&P does not see evidence of this yet, even under our base case, the recovery will take time, with lower GDP growth (and higher unemployment) for a number of years.

While there is much more in the full paper (link), we wanted to focus on S&P's forecast for North American banks which report Q2 earnings next week, and where we expect tens of billions more in loss reserves will be booked:

North America: Robust uptick in loan provisions driven by regulatory requirements

We forecast credit losses of $366 billion over the two years to end-2021 for the U.S. and Canada. This compares with losses of just $63 billion in 2019. For the U.S., our base case estimate is that loan loss rates will be about half the roughly 6% level the U.S. Federal Reserve has projected in its nine-quarter severely adverse scenario (which is unrelated to the pandemic) in its last two annual stress tests. We expect banks to provision for those losses faster than banks in most other regions, and particularly in 2020, because of this year's implementation of the CECL accounting methodology.

In fact, in the first quarter of 2020, U.S. FDIC-insured banks reported a robust $53 billion in provisions for credit losses, and some banks have indicated that provisions could be just as high in the quarter ended in June. As a result, the ratio of allowances for credit losses to loans and leases rose to 1.80% at March 31, 2020, from 1.18% at the end of 2019.

We underscore the fluidity of the current situation and the difficulty in forecasting credit losses. Whether our estimate proves too conservative or lenient will depend heavily on the performance of the economy and the continued effectiveness of support measures the government has provided individuals and businesses. Our estimate factors in the U-shape, gradual recovery our economists have set as their base case as well as the assumed benefits of government support measures.

As part of the stress test results released in June 2020, the Fed also provided a sensitivity analysis where it estimated potential losses related to the pandemic under three scenarios for the 33 large banks that were part of the test: 8.2% under a V-shaped recession, 10.3% under a U-shaped one, and 9.9% under a W-shaped recession. Those figures are all higher than the 6.8% loss rate during the global financial crisis. Importantly, however, the Fed's analysis did not factor in any benefit from government support measures.

The bottom line: global banks are already facing $2 trillion in losses over 2 years. Should the pandemic make a triumphal return and force another round of shutdowns, countless banks - both in the US and across the world - will end up going out of business, as there is no amount of direct or indirect Fed funding that can offset another $2 trillion in losses in the coming years. 

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Delivering aid during war is tricky − here’s what to know about what Gaza relief operations may face

The politics of delivering aid in war zones are messy, the ethics fraught and the logistics daunting. But getting everything right is essential − and…




Palestinians on the outskirts of Gaza City walk by buildings destroyed by Israeli bombardment on Oct. 20, 2023. AP Photo/Ali Mahmoud

The 2.2 million people who live in Gaza are facing economic isolation and experiencing incessant bombardment. Their supplies of essential resources, including food and water, are quickly dwindling.

In response, U.S. President Joe Biden has pledged US$100 million in humanitarian assistance for the citizens of Gaza.

As a scholar of peace and conflict economics who served as a World Bank consultant during the 2014 war between Hamas and Israel, I believe that Biden’s promise raises fundamental questions regarding the delivery of humanitarian aid in a war zone. Political constraints, ethical quandaries and the need to protect the security of aid workers and local communities always make it a logistical nightmare.

In this specific predicament, U.S. officials have to choose a strategy to deliver the aid without the perception of benefiting Hamas, a group the U.S. and Israel both classify as a terrorist organization.


When aiding people in war zones, you can’t just send money, a development strategy called “cash transfers” that has become increasingly popular due to its efficiency. Sending money can boost the supply of locally produced goods and services and help people on the ground pay for what they need most. But injecting cash into an economy so completely cut off from the world would only stoke inflation.

So the aid must consist of goods that have to be brought into Gaza, and services provided by people working as part of an aid mission. Humanitarian aid can include food and water; health, sanitation and hygiene supplies and services; and tents and other materials for shelter and settlement.

Due to the closure of the border with Israel, aid can arrive in Gaza only via the Rafah crossing on the Egyptian border.

The U.S. Agency for International Development, or USAID, will likely turn to its longtime partner on the ground, the United Nations Relief and Works Agency, or UNRWA, to serve as supply depots and distribute goods. That agency, originally founded in 1949 as a temporary measure until a two-state solution could be found, serves in effect as a parallel yet unelected government for Palestinian refugees.

USAID will likely want to tap into UNRWA’s network of 284 schools – many of which are now transformed into humanitarian shelters housing two-thirds of the estimated 1 million people displaced by Israeli airstrikes – and 22 hospitals to expedite distribution.

Map of Gaza and its neighbors
Gaza is a self-governing Palestinian territory. The narrow piece of land is located on the coast of the Mediterranean Sea, bordered by Israel and Egypt. PeterHermesFurian/iStock via Getty Images Plus


Prior to the Trump administration, the U.S. was typically the largest single provider of aid to the West Bank and Gaza. USAID administers the lion’s share of it.

Since Biden took office, total yearly U.S. assistance for the Palestinian territories has totaled around $150 million, restored from just $8 million in 2020 under the Trump administration. During the Obama administration, however, the U.S. was providing more aid to the territories than it is now, with $1 billion disbursed in the 2013 fiscal year.

But the White House needs Congress to approve this assistance – a process that requires the House of Representatives to elect a new speaker and then for lawmakers to approve aid to Gaza once that happens.


The United Nations Relief and Works Agency is a U.N. organization. It’s not run by Hamas, unlike, for instance, the Gaza Ministry of Health. However, Hamas has frequently undermined UNRWA’s efforts and diverted international aid for military purposes.

Hamas has repeatedly used UNRWA schools as rocket depots. They have repeatedly tunneled beneath UNRWA schools. They have dismantled European Union-funded water pipes to use as rocket fuselages. And even since the most recent violence broke out, the UNRWA has accused Hamas of stealing fuel and food from its Gaza premises.

Humanitarian aid professionals regularly have to contend with these trade-offs when deciding to what extent they can work with governments and local authorities that commit violent acts. They need to do so in exchange for the access required to help civilians under their control.

Similarly, Biden has had to make concessions to Israel while brokering for the freedom to send humanitarian aid to Gaza. For example, he has assured Israel that if any of the aid is diverted by Hamas, the operation will cease.

This promise may have been politically necessary. But if Biden already believes Hamas to be uncaring about civilian welfare, he may not expect the group to refrain from taking what they can.

Security best practices

What can be done to protect the security of humanitarian aid operations that take place in the midst of dangerous conflicts?

Under International Humanitarian Law, local authorities have the primary responsibility for ensuring the delivery of aid – even when they aren’t carrying out that task. To increase the chances that the local authorities will not attack them, aid groups can give “humanitarian notification” and voluntarily alert the local government as to where they will be operating.

Hamas has repeatedly flouted international norms and laws. So the question of if and how the aid convoy will be protected looms large.

Under the current agreement between the U.S., Israel and Egypt, the convoy will raise the U.N. flag. International inspectors will make sure no weapons are on board the vehicles before crossing over from Arish, Egypt, to Rafah, a city located on the Gaza Strip’s border with Egypt.

The aid convoy will likely cross without militarized security. This puts it at some danger of diversion once inside Gaza. But whether the aid convoy is attacked, seized or left alone, the Biden administration will have demonstrated its willingness to attempt a humanitarian relief operation. In this sense, a relatively small first convoy bearing water, medical supplies and food, among other items, serves as a test balloon for a sustained operation to follow soon after.

If the U.S. were to provide the humanitarian convoy a military escort, by contrast, Hamas could see its presence as a provocation. Washington’s support for Israel is so strong that the U.S. could potentially be judged as a party in the conflict between Israel and Hamas.

In that case, the presence of U.S. armed forces might provoke attacks on Gaza-bound aid convoys by Hamas and Islamic jihad fighters that otherwise would not have occurred. Combined with the mobilization of two U.S. Navy carrier groups in the eastern Mediterranean Sea, I’d be concerned that such a move might also stoke regional anger. It would undermine the Biden administration’s attempts to cool the situation.

On U.N.-approved missions, aid delivery may be secured by third-party peacekeepers – meaning, in this case, personnel who are neither Israeli nor Palestinian – with the U.N. Security Council’s blessing. In this case, tragically, it’s unlikely that such a resolution could conceivably pass such a vote, much less quickly enough to make a difference.

Topher L. McDougal does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Diagnosis and management of postoperative wound infections in the head and neck region

“The majority of wound infections often manifest themselves immediately postoperatively, so close followup should take place […]” Credit: 2023 Barbarewicz…



“The majority of wound infections often manifest themselves immediately postoperatively, so close followup should take place […]”

Credit: 2023 Barbarewicz et al.

“The majority of wound infections often manifest themselves immediately postoperatively, so close followup should take place […]”

BUFFALO, NY- October 20, 2023 – A new research perspective was published in Oncoscience (Volume 10) on October 4, 2023, entitled, “Diagnosis and management of postoperative wound infections in the head and neck region.”

In everyday clinical practice at a department for oral and maxillofacial surgery, a large number of surgical procedures in the head and neck region take place under both outpatient and inpatient conditions. The basis of every surgical intervention is the patient’s consent to the respective procedure. Particular attention is drawn to the general and operation-specific risks. 

Particularly in the case of soft tissue procedures in the facial region, bleeding, secondary bleeding, scarring and infection of the surgical area are among the most common complications/risks, depending on the respective procedure. In their new perspective, researchers Filip Barbarewicz, Kai-Olaf Henkel and Florian Dudde from Army Hospital Hamburg in Germany discuss the diagnosis and management of postoperative infections in the head and neck region.

“In order to minimize the wound infections/surgical site infections, aseptic operating conditions with maximum sterility are required.”

Furthermore, depending on the extent of the surgical procedure and the patient‘s previous illnesses, peri- and/or postoperative antibiotics should be considered in order to avoid postoperative surgical site infection. Abscesses, cellulitis, phlegmone and (depending on the location of the procedure) empyema are among the most common postoperative infections in the respective surgical area. The main pathogens of these infections are staphylococci, although mixed (germ) patterns are also possible. 

“Risk factors for the development of a postoperative surgical site infection include, in particular, increased age, smoking, multiple comorbidities and/or systemic diseases (e.g., diabetes mellitus type II) as well as congenital and/ or acquired immune deficiency [10, 11].”


Continue reading the paper: DOI: 

Correspondence to: Florian Dudde


Keywords: surgical site infection, head and neck surgery


About Oncoscience

Oncoscience is a peer-reviewed, open-access, traditional journal covering the rapidly growing field of cancer research, especially emergent topics not currently covered by other journals. This journal has a special mission: Freeing oncology from publication cost. It is free for the readers and the authors.

To learn more about Oncoscience, visit and connect with us on social media:

For media inquiries, please contact

Oncoscience Journal Office

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Phone: 1-800-922-0957, option 4


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G77 Nations, China, Push Back On U.S. “Loss And Damage” Climate Fund In Days Leading Up To UN Summit

G77 Nations, China, Push Back On U.S. "Loss And Damage" Climate Fund In Days Leading Up To UN Summit

As was the case in primary school with…



G77 Nations, China, Push Back On U.S. "Loss And Damage" Climate Fund In Days Leading Up To UN Summit

As was the case in primary school with bringing in presents, make sure you bring enough for the rest of the class, otherwise people get ornery...

This age old rule looks like it could be rearing its head in the days leading up to the UN COP 28 climate summit, set to take place in the United Arab Emirates in about six weeks. 

At the prior UN COP 27, which took place in Egypt last year, the U.S. pushed an idea for a new World Bank "loss and damage" climate slush fund to help poor countries with climate change. But the G77 nations plus China, including many developing countries, are pushing back on the idea, according to a new report from the Financial Times

The goal was to arrange how the fund would operate and where the money would come from for the "particularly vulnerable" nations who would have access to it prior to the upcoming summit in UAE.

But as FT notes, Pedro Luis Pedroso Cuesta, the Cuban chair of the G77 plus China group, has said that talks about these details were instead "deadlocked" over issues of - you guessed it - where the money is going and the governance of the fund.

The U.S.'s proposal for the fund to be governed by the World Bank has been rejected by the G77 after "extensive" discussions, the report says. Cuesta has said that the nations seek to have the fund managed elsewhere, but that the U.S. wasn't open to such arrangements. 

Cuesta said: “We have been confronted with an elephant in the room, and that elephant is the US. We have been faced with a very closed position that it is [the World Bank] or nothing.”

Christina Chan, a senior adviser to US climate envoy John Kerry, responded: “We have been working diligently at every turn to address concerns, problem-solve, and find landing zones.” She said the U.S. has been "clear and consistent" in their messaging on the need for the fund. 

Cuesta contends that the World Bank, known for lending to less affluent nations, lacks a "climate culture" and often delays decision-making, hindering quick responses to climate emergencies like Pakistan's recent severe flooding.

The G77 coalition voiced concerns about the World Bank's legal framework potentially limiting the fund's ability to accept diverse funding sources like philanthropic donations or to access capital markets.

With just days left before the UN COP 28 summit, the World Bank insists that combating climate change is integral to its mission and vows to collaborate on structuring the fund.

Tyler Durden Fri, 10/20/2023 - 15:45

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