Impacto de la crisis del COVID-19 en el sistema bancario portugués. Enfoque de ordenamiento lineal
| Autor | Zbigniew Korzeb, Pawe? Niedzió?ka, Armando Silva |
| Cargo | Head, Department of Management, Economy and Finance, Bialystok University of Technology, Kleosin, Poland. - Head, Financial Risk Management Unit at Banking Institute, Warsaw School of Economics, Warsaw, Poland. - Head, Corporate Finance Master, Instituto Superior de Contabilidade e Administração do Porto, Instituto Politécnico do Porto and CEFU... |
Estudios Gerenciales vol. 37, N.° 159, 2021, 226-241
226
Research article
Impact of the COVID-19 crisis on the Portuguese banking system. Linear ordering
method
Zbigniew Korzeb
Head, Department of Management, Economy and Finance, Bialystok University of Technology, Kleosin, Poland.
z.korzeb@pb.edu.pl
Paweł Niedziółka
Head, Financial Risk Management Unit at Banking Institute, Warsaw School of Economics, Warsaw, Poland.
pniedz@sgh.waw.pl
Armando Silva*
Head, Corporate Finance Master, Instituto Superior de Contabilidade e Administração do Porto, Instituto Politécnico do Porto and CEFUP, Porto, Portugal.
armandosilva@iscap.ipp.pt
Abstract
The goal of this pap er is to assess th e resilience of Por tuguese ba nks to the potential imp act of the COVID -19 pandemic. For this
purpose, diag nostic variables of 19 banks we re selected and priori tized using linear ordering m ethods. This methodolog y allowed us
to perform r ankings of banks using si x linear ordering method s and taking into account two w eighting procedures and t wo variants of
the diagnostic fea ture. The study was als o supplemented by a sensitiv ity analysis and an optimizati on procedure aimed at identif ying
the optimal linear o rdering method. The main r esults obtained show that th e resilience of Portugue se banks is not evenly distr ibuted
among individ ual banks. These findi ngs could be used by regulat ors to plan support me asures for the most fragi le banks.
Keyword s: banking sector; COVID-19; pandemic crises; multidimensional comparative analysis.
Impacto de la crisis del COVID-19 en el sistema bancario portugués. Enfoque de ordenamiento lineal
Resumen
El objetivo de este trabajo es evaluar la resistencia de los bancos portugueses al impacto potencial de la pandemia por COVID-19. Para ello,
se seleccionaron y priorizaron variables de diagnóstico de 19 bancos mediante métodos de ordenamiento lineal; esta metodología permitió
realizar rankings de bancos utilizando seis métodos de ordenamiento lineal teniendo en cuenta dos procedimientos de ponderación y dos
variantes de la característica de diagnóstico. El estudio también se complementó con un análisis de sensibilidad y un procedimiento de
optimización destinado a identificar el método ideal de ordenación lineal. Los principales resultados obtenidos muestran que la resistencia
de los bancos portugueses no se distribuye uniformemente entre los bancos individuales. Los reguladores podrían utilizar estos resultados
para planificar medidas de apoyo a los bancos más frágiles.
Palabras clave: sector bancario; COVID-19; crisis pandémicas; análisis comparativo multidimensional.
Impacto da crise d o COVID-19 no sistema bancár io português. Abordagem d e ordenação linear
Resumo
O objetivo des te trabalho é avali ar a resistência dos ban cos portugues es ao potencial impact o da pandemia COVID -19. Para isso, va riáveis
de diagnóstico de 19 banco s foram seleci onadas e prior izadas por meio de m étodos de ordenaç ão linear. Essa metod ologia permiti u
classific ar os bancos usando seis métodos d e ordenação linear e levando e m consideração dois procedi mentos de ponderação e duas
variantes da c aracterística diagn óstica. O estudo também fo i complementado com uma anális e de sensibilidade e um procedi mento de
otimização, com o o bjetivo de identificar o m étodo de ordenação linea r ideal. Os principais r esultados obtidos mos tram que a resistência
dos bancos por tugueses não se encontr a uniformemente distribuída e ntre os bancos individuais. O s reguladores poderi am usar esses
resultados p ara planear medidas de a poio aos bancos mais frág eis.
Palavras-chave: setor bancário; COV ID-19; crise pandêmica; análise comparativa multidimensional.
*Corresponding author.
JEL class ification: G01; G21.
How to cite: Kor zeb, Z., Niedzió łka, P. & Silva, A. (2 020). Impac t of the COVID-19 crisi s on the Portugu ese banking sy stem. Linear o rdering metho d. Estudios
Gerenciales, 37(159), 226-241. https://doi.org/10.18046/j.estger.2021.159.4414
DOI: https://doi.org/10.18046/j.estger.2021.159.4414
Received: 16-oct-2020
Accepted: 6-apr-2021
Availabl e on line: 18-jun-202 1
© 2021 Universidad ICESI. Published by Universidad Icesi, Colombia.
This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/)
Korzeb et al. / Estudios Gerenciales vol. 37, N.° 159, 2021, 226-241 227
1. Introduction
In 2019, the Portuguese financial sy stem comprised
152 credit institutions out of whi ch 62 were banks. The
five larges t banks in Portugal a ccount for 80-85% of
the assets of the whol e banking sector. Employment
in credit institutions lo cated in Portugal is over 46 000
people (Banco de Portugal, 2 020). After some troubled
years (2010-2017), the condition of the Por tuguese
banking sector has imp roved significantly (A ssociati on
of Portuguese B anks - APB, 2019). It is evidenced,
among others, by:
• Increase in Return on Equit y (ROE) from (-)0.8%
in December 2017 to 5.3% at the end of June 2019,
compared to 6.4% for the euro area at t hat time,
• Decrease in Non-Per forming-Loans (NPL ) share in
the portfolio from 17.5% in 2015 to 8.1% at the end of
June 2019 (however, it is still 2.5 times the average f or
the euro area), and decreas e in cost of credit risk in
the audited period fro m 1.2% to 0.4%,
• Improvement in solvenc y (increase in Tier 1 ratio from
12.4% at the end of 2015 to 13.9% at the end of June
2019, although it is still below the euro area aver age),
• Improvement in liquidit y (decrease in Loan-to-Dep osit
ratio from 96% in December 2015 to 88% in June 2 019).
Meanwhile in 2020 , the COVID-19 pandemic put an
end to this recovery, it even reached Portugal relatively
late compared to other Wester n European countries.
In fact, pandemic-s ensitive sector s such as tourism,
hospitality, transportation and construction, for which
a relatively early l ockdown occurred, r epresent large
shares of Portuguese banks por tfolios (between 5 %
and 15% for the largest bank s) and as a result of the
COVID-19 escalation in Portugal in the second half of
March 2020, some industries (bakeries , restaurants)
recorded a drop in reve nues over 70%, as well as traffic
which decreased by 75%.
Then, as a consequence of the pandemic, the
Portuguese economy has seen a sharp deter ioration in
macroeconomic par ameters with sever al implications
for the banking sector. Recent forecasts indicate a fall
in GDP in 2020 by 3.4% (in Febr uary 2020 a rise of 1.7%
was forecasted), an increase in unemployment r ate
up to 8.2% in 2020 (in Febr uary 2020, a 6.4% increase
was indicated), a grow th of the public debt-to-GDP
ratio to 124.9% in 2020 (while in February 20 20 it was
estimated at 114.6%), and a fall in inflation rate as well
as recession on the real estate market. Meanwhile,
the economic suppor t programme of the gover nment
amounts to €12.5 billion, i.e. approx. 6. 2% of GDP. This
scheme covers inter alia: investments in the national
health system, subsidi es for households (e.g. temporar y
suspension of labour contr acts), measures focused on
tackling the liquidit y problems of companies , deferring
tax payments and c redit lines for companies channelled
through the banking sy stem (with lower interes t
rates, grace per iods, and longer matur ities) as well as
reduction of charge s on electronic payments or deferr al
of loan repayment sche mes (Gonçalves, Belo & Pinheiro ,
2020). Moreover, during this time, banks also adopted
measures to suppor t both families and compa nies, either
on its own initiative o r within government pro grammes.
Anyway, the managers of Portugue se banks estimate
that the number of increasing wr ite-downs w ill mean
that banks will not make profits in 2020 and 20 21, and
will become the most af fected group of entities b y the
pandemic (Winterbrun, 2020).
Given these gloomy predictions for Portuguese
banks, in general , it is very impor tant to assess th e
implications for each of them, trying to identif y the
most vulnerable ones and then help them with special
politics. To the authors know ledge, no study has yet
been produced to analyse th e impact of COVID-19 on
the Portuguese b anking sector and so this is the main
contribution we hope to make with this research; in
brief, the main purpose of this p aper is to assess the
Portuguese b anks in terms of their resilie nce to the
consequences of the COV ID-19 pandemic, and then
addressing the aforementioned research gap.
In order to do so, we employ line ar ordering methods
in the sequence of previou s analyses, as in the case of the
assessment of impac t of the pandemic on the 13 largest
commercial banks in Pol and (Korzeb & Niedziółka,
2020). However, the aforementioned study was b ased on
only two linear ord ering methods, i.e. TOP SIS method
and Hellwig’s approach. Although th e linear ordering
methods have been used by some authors, e.g. He llwig
(1968 ), Hwang and Yoon (1981), Strahl (1978), Nowak
(1977 ) or Kukuł a and Luty (2015), they focused o n
specific individual linear ordering methods with limited
procedure of double check ing the results (which c an be
performed b y the wide use of alternativ e approaches
or by applying multi-method procedure), and those
studies were not applie d to the banking sector either.
Meanwhile, our study i s focused inter alia on the impact
of the structure of bank industry por tfolio on the
resistance to COV ID-19, since it may be decisive for NPL
dynamics. In f act, Ari, Chen and Ratnovski (2020) also
emphasised that the way of managing NPL portfolios
seems to be crucial to the econ omic recovery during the
COVID-19 crisis and thereafter.
The conclusions of the stud y presented in this
article may be use d in superviso ry and regulator y
policies and may be one of the premises that investo-
rs − who engage their funds in the purchase of bank
shares − could take into account. Anoth er contribution
is related to the sensitivity of banks to the ef fects of
the COVID-19 pandemic being import ant information
for bank managers in the contex t of risk management
process and in positioning banks against the peer
competitors. The worked out measures may al so be
used in the structuring of financial stabil ity indices or
in rating methodologies.
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