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How COVID-19 is Influencing US Banks?

Economically, the Coronavirus – known as COVID-19 – is having a detrimental effect around the world. Millions are not working because their jobs cannot be changed to stay-at-home work. Others are attempting to cover their losses with second jobs, using freelance work. Those who are lucky enough to be in an industry that lends itself to at-home work or essential needs can earn paychecks as usual, but risk exposure to the virus. So, how is the US banking system coping with such changes? Banks are limiting hours, credit card companies are inundated with phone calls, and some financial institutions are offering grace periods with no late fees for missed payments.

The Federal Reserve, the US Central Bank, is the leader in making decisions to help keep the economy from hitting a depression during this time of illness. The first thing the Federal Reserve did was announce a reduction in interest rates to the lowest they have been in over a decade. The Federal Reserve is also working with the Trump Administration on the $2 trillion bailouts, which could mean opening the printing presses at the mints.

Several Governors, because the power sits with them, have asked financial institutions to provide support in this time of trouble. Colorado is one state that asked for student loan companies to allow deferment for lenders of personal loans, mortgages, and other loan products to allow for missed or overdue payments. Many US banks are responding with help.

Banks Limiting Hours

Depending on the state, most banks have closed their interior counters, and are keeping their drive-thru lanes and ATMs available for consumers. In an effort to protect workers who are coming to help customers, the banks decided that having their doors open posed a potential threat to the health of their employees.

US Banks are receiving cash through drive-thru tellers and allowing the coins to go out in small batches for businesses that remain open for essential shopping needs.

To protect tellers, banks are requiring their employees to wear gloves when they receive a packet through the drive-thru. They process everything as usual but ensure that their employees don’t have to touch money directly.

The banks are also requesting their employees to keep the counters and equipment clean by using bleach or alcohol.

Hours have also shortened in most states with stay-at-home orders. Banks that used to open at 8 a.m. are now opening around 9 or 10 a.m. and closing at 4 p.m.

US Banks are also encouraging people to use online services as much as possible to reduce hold time.

Handling the High-Volume Phone Calls

Banks are inundated with numerous phone calls for several reasons. Those tied with credit card products like Capital One, which also offer savings accounts, are being asked about special promotions or payment forgiveness. Most of the credit card companies have already changed the due dates for credit cardholders to May, allowing for “no payment due” through April to help with the economic toll.

People are also attempting to be savvy and find savings where they can. Talking with credit card companies about getting better annual percentage rates (APRs) is just one way the population is attempting to save money on their current balances. Unfortunately, most banks with credit cards are not offering a reduced rate on existing balances. However, for any purchases going forward, if the cardholder qualifies, companies are willing to reduce the variable interest rates.

Other cards are rolling out balance transfer options, with zero interest for a set period, and a small transfer fee.

With plenty of articles out there about how to improve one’s credit, it is no surprise that many of the banks and credit card companies are receiving calls during this tough time. The US is attempting to cut the economic crisis to a minimum and do everything possible to reduce the troubles being faced.

Grace Periods

Not all states or companies have decided to give the US population a break, but many banks are. They are willing to work with the customers who call about their individual situations. It does take a phone call to see what one’s bank is willing to do about missed or overdue payments in light of possible missing wages.

In states that have shut down their borders, mandated stay-at-home orders, and closed all non-essential businesses, the government has asked for blanket protection for employees. However, it is still important to call the lender, mortgage bank, or Credit Card Company to see what they are willing to do and to make sure there are no penalties.

Banks Offering Relief

US Banks began discussing what to do if the nation had to shut down due to the virus. March 9, 2020 was a critical start date for the FDIC. The FDIC asked banks and other financial locations to consider what may be needed if the Coronavirus spread in the US. The plan indicated such things as waiving fees, early withdrawal penalties, or offering borrowers the option to skip or defer payments.

Many banks, including The US Bank, have done this, along with a list of many other changes.

The Small Business Administration has Economic Injury Disaster Loans that they are offering small companies who had to shut down due to the virus. The US Chamber of Commerce Vice President, Tom Sullivan, stated that the SBA and Treasury are partnering to ensure the focus is on small companies who need help. Their priority is to ensure that no family or business is going to be ruined by the disruption the virus is causing.

New York’s Department of Financial Services is another organization that requested new emergency regulations for New Yorkers. Financial institutions are asked to help those who can demonstrate financial hardship due to the illness.

A few of the things banks in New York State are doing is eliminating ATM fees, credit card overdue payment fees, and overdraft fees. The banks are encouraged to offer safe and sound banking practices while helping New Yorkers survive financially.

Ally

Ally is one bank that has announced changes for during the COVID-19 outbreak. The bank is offering to waive all fees relating to debit cards, expedited checks, excessive transactions, and overdrafts. They are also willing to work with customers to defer auto loans up to 120 days. However, for the auto loan deferral, customers need to show a solid reason for their request and understand that the finance charges are still going to accrue. For as many months as the loan is deferred, the credit will be extended.

Ally is also helping mortgage customers, with the same length of deferment. No late fees will be charged. However, interest will continue to add to the loan. Ally works mostly online, with a range of services. Customers are encouraged to call or look online for a deferment application to get the process started.

Bank of America

Bank of America stated they are continuing to assess the Coronavirus development and are willing to support clients in financial hardship. On March 19, 2020, the Bank of America announced a detailed plan. Consumers and small business deposit accounts could request refunds of the overdraft, monthly maintenance fees, and insufficient funds fees. Customers could also ask for payments to be delayed or late charges refunded on small business loans. For personal, home equity, auto loans, and mortgages, clients could get a deferment. Those who are up to date before the crisis qualify.

BBVA USA

Formally, Compass Bank is often a place one can get an affordable loan. The bank is willing to work with those holding installments, real estate, credit cards, or small business loans. They are going to defer payments or extend the loan to ensure customers have relief.

Capital One

Capital One announced they are encouraging customers to access their accounts through the digital portal. Anyone with financial difficulties due to the virus should contact the bank directly to find out what help can be offered. The assistance includes minimum payment, deferred loans, and fee suppression.

Capital One established a Coronavirus help page to help customers understand the virus and what the bank is willing to do to ensure customers do not need to panic.

Chase

Chase temporarily closed 20% of their branches. They have close to 4,000 branches still open but request their clients use online banking whenever possible. Those who are affected by the Coronavirus are encouraged to call the customer service number on the back of their debit or credit card. They have an online page and the helpline to ensure customers can get what they need during this time of crisis. They are part of the Economic Injury Disaster Loan program and are willing to offer grace periods for customers.

Citibank

Citibank stated they would offer assistance for at least the first 30 days of the virus spread, starting March 9. They are providing waivers on monthly services fees, penalties for CD withdrawals, fee waivers for report deposit, options for small business customers, and help for credit card and mortgage customers who qualify. It is essential to call for assistance and have a representative determine eligibility for the credit card and mortgage help.

Discover, Fifth Third Bank, HSBC USA, Huntington, Marcus by Goldman Sachs, and PNC Bank are just a few of the other financial institutions offering help to consumers during this economic and health crisis.

From the above descriptions, it is clear US Banks are influenced by COVID-19 not only from a physical standpoint but also due to customer needs. For further information about the banks offering assistance, readers are encouraged to visit Forbes and read Kelly Anne Smith and Daphne Foreman’s article about the US Banks.

Emergency Management

Banks are implementing emergency management systems to better help their clients in these tough times. Oliver Wyman has stated that banks need to assess six areas of their emergency planning to offer continuity crisis management.

The first thing banks did and needed to continue to focus on crisis management rather than their usual model of business continuity.

Next, banks need to have a level 5 plan. The following scenarios could occur:

● Scenario 1 is where the worst of the spread is over in two or three months, with business and people returning to normal.
● Scenario 2 is a six-month control concept where it will take half a year of no-growth and economic recession before things return to normal.
● Scenario 3 is a bad case where the pandemic may last for a full year, and anxiety triggers a global recession.

Banks need to account for each scenario to have a good plan in place, with five levels to help work around the economic recession that could result.

1. Level 1 is figuring out which scenario to enact a plan for as things change.
2. Level 2 is about the impact on borrowers and sectors that are directly affected by the virus.
3. Level 3 is the ripple effect that banks will need to account for based on hospitals to tourism.
4. Level 4 is the stage to assess the industries critically crucial to keeping an economy going, which includes banks, asset managers, insurers, accountants, and lawyers.
5. Level 5 is the impact on end consumers and those who feel the most pain from the pandemic and how to help.

All banks need to be decisive in their moves to ensure clients are getting the best help in a situation they have no control over. Many things are going to go digital, where the US and globally, people are going to start using digital banking methods to pay for products. The idea of one currency to avoid a complete loss of structure may be more worthwhile than we think. There is a definite need for banks to assess the long haul and keep the global banking system, plus local systems in place. US Banks are doing their part and need to look to the future with regards to what may happen for employees who might be out of work permanently.

COVID-19 is influencing US Banking moves and will continue to do so as the spread grows, and potential fallouts lead towards a full recession.