Is it just me or have the last few years felt like a minor infinity? It seems like a lifetime ago since the global COVID-19 pandemic hit in the early part of 2021, and whilst it’s barely been 18 months, I for one feel that I have aged 18 years! Between long, painful lockdowns, the lifting and reintroduction of containment measures and restrictive travel bans, it kind of feels like the Corono-virus epidemic has lasted forever. Indeed, many of us out there can barely even remember life before it or dare to imagine a life beyond it.
Yes you may well be forgiven for wondering if the pandemic is ever going to end. As winter approaches, Europe appears to be headed back towards lockdows and world governments are ushering their citizens towards 3rd vaccination shots in fear of a 4th (or is it 10th?) wave.
Looking For The Green Shoots Of Recovery
But, there are actually some very encouraging signs that the pandemic is abating if you only know where to look for them. Whilst COVID-19 clearly isn’t simply going away, the consensus from global business leaders now seems to be that we can at least start getting on with our lives.
Firstly, when COVID first hit, the world’s health and travel insurers wanted nothing to do with it and promptly re-worded policies to avoid coverage for any COVID related illness or incidents. However, 18 months later and most major travel and health insurers are now offering COVID cover as part of their standard packages demonstrating that they have done the sums, ran the risk assessments and now consider it to be manageable and financially viable to cover.
Another place to look for clues is the various COVID support measures launched by world governments. The UK has now ended its furlough scheme which supported laid off workers, and the US has stopped offering COVID relief and business disruption loans.
Somebody Think of The Bankers!
Equally interestingly, the Canadian financial services regulator, The Office of the Superintendent of Financial Institutions (OSFI), has now lifted all restraints and special measures it placed on the sector during the pandemic.
In case you were unaware of this, the Canadian government was extremely concerned by the potential impact a long, painful pandemic could have on the banking and insurance industry and as such, in March 2020 the regulator took some rather stringent actions that were unmatched elsewhere in the neo-liberal economies of the west. These measures included a ban on payment of shareholder dividends, limited executive pay and increased the amount of capital reserves (i.e. cash) financial institutions had to hold.
The measures had naturally slowed the sector down and whilst they may have reassured the average Canadian of their banks stability, the stock markets were hot too happy.
The lifting of restrictions is a relief for the financial service sector, a boon for the stock exchange and a sign of confidence from the government that they consider the worst damage of the pandemic to be behind them. Finally it seems that “business as usual” can resume in Canada.
What is BAU?
But what exactly is “business as usual” after the pandemic? We touched on the impact that the pandemic had on the global insurance sector earlier on but what now remains to be seen is how hard insurers are going to be hit by a pending backlog of worldwide COVID damage claims and lawsuits brought by business owners who feel that insurers unlawfully breached terms of cover by failing to indemnify them. If key rulings in the UK and US go against them, it will hit them extremely hard and may even force some smaller insurers into serious trouble.
As for banking, traditional banks all over the world have not exactly been prospering since the crash of 2008 and for the Canadian banks, having their hands bound for 2020 did not help. In fact the one time big bank monopoly is now being fast eroded by challenger banks, fin-tech companies and the rise of neo-banks. Whilst challenger banks like Monzo and Wise have been making headway in Europe and the UK for years, 2021 was the year that Canada finally seems to have woken up to the concept of the neo-bank.
Indeed, the popularity of neo-banks exploded in Canada during the pandemic. Why Canadians chose to wait until a global health crisis as the time to embrace an emerging global market trend is not entirely clear! However it may simply be that the years leading up to the pandemic saw a lot of venture capital moving into and around the country and 2020 and 2021 just happened to be the time when the challenger banks started to establish themselves.
Whatever the reasons may be, it is clear that the sector is in good health and there are now more than one dozen operating in Canada.
Whilst global players like Wise (formerly Transferwise) and Revolut are now operating in Canada, there are also a few homegrown fin-tech banks servicing customers. Whilst Brightside and Koho may be the best known 2, there are now a total of 8 Canadian Neo banks online effectively spoiling account holders for choice. However, what must be remembered is that whilst the challenger banks are certainly competing with the old guard for customers, many challenger banks are actually backed by the investment arms of the big banks and in many cases even using the infrastructure they built.
As 2021 draws to a close, Canada does seem to be managing COVID cases well and there are no signs of alarm for the economy and no indication that the regulator will be taking any further action. Therefore, as far as the financial sector is concerned, COVID is rapidly becoming a distant, bad memory and its time to get back to work.