Allocation risks may thus emerge for the entire loan portfolio that appear paradoxical at first glance: even if the creditworthiness of all enterprises has improved following a long upswing, making each individual loan appear sound, the structure of the loan portfolio may shift to enterprises that are riskier in relative terms.
The initial wave of market stress has passed, and the recovery has begun much sooner than expected. This speaks to the country’s tenacity, ingenuity, and spirit in responding to even the greatest of shocks. The challenge we face now is distinct, formidable, and complex. The surprise of the COVID event is gone, replaced by a clearer view of its economic consequences.