European sector outlook The pandemic perils and the paradigm shifts

The pandemic has affected all sectors globally, changing operating practices significantly. From global food supply chains to financial powerhouses, the impact has been substantial, especially in Europe, once the epicentre of the outbreak. As the region recovers from the latest peak in infections, although still vulnerable to subsequent waves and mutations, this insight paper explores how strategic priorities and procedures have changed by sector, and looks at the shift in the lending space supporting these sectors.

Key Takeaways

• Financing green (i.e., environmentally conscious) projects remains a key focus across sectors, in line with the European Green Deal to achieve carbon neutrality by 2050. Green mortgages and bond issuances are becoming increasingly popular to facilitate these projects, further strengthened by the ECB’s decision to accept green bonds as collateral (with coupons linked to sustainability targets) starting in 2021.
• Digitalisation is at the core of the post-pandemic recovery – ranging from proptech initiatives and precision agriculture to enhanced collaboration with fintech companies across the lending value chain in KYC processes, identification of EWS, and comprehensive credit scoring inclusive of alternative data.
• Regulatory support offered through initiatives such as NPL securitisation for banks and ongoing liquidity stimulus are likely to help lenders both reduce the burden on asset quality and facilitate incremental credit creation much needed for business recovery.

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