Looking ahead, bank profitability is expected to remain weak and not to recover to pre-COVID-19 levels before 2022. Banks are stepping up cost-cutting efforts but may still need to consolidate in response to this development.
Third, we have seen investment funds taking on more exposure to longer-duration and lowerrated debt issued by non-financial corporations, increasing the likelihood of outflows and losses if corporate credit risk rises materially. Liquidity risk in funds has also started to mount up again. In parallel, we see signs of greater risk-taking by insurers, too.