European DataWarehouse (EDW) has published a short paper showing that some of the effects of the COVID-19 crisis were already visible in the Loan Level Data (LLD) dated 31st March 2020.
Starting from a few cases in early February 2020, COVID-19 spread throughout Europe, forcing governments to enact severe social distancing measures. It is expected that the crisis will lead to substantial amounts of loan modifications. EDW used the reporting criteria suggested to flag loan modifications due to COVID-19 to see to what extent these are already visible.
Most governmental decisions on social distancing were enacted in March 2020. These measures have severely reduced the income of some borrowers from mid-March onwards. Governmental support, when available, was often delayed and often failed to fully compensate for lost income, leaving some borrowers having to pay more than they could afford. To compensate, some borrowers either withdrew on their savings or asked for a credit or payment holiday. Governments have encouraged lenders to grant forbearance measures to help borrowers and soften the blow to the economy. In several countries, it was reported that measures such as allowing a temporary switch to interest only payments or payment holidays have indeed been granted to a substantial number of borrowers.
In this respect, EDW’s data will make it possible to monitor these changes given that specific reporting guidelines are available to help data providers.
Read the short paper here: European DataWarehouse Report – Monitoring the impact of COVID-19
EDW became operational in 2013 in the wake of the 2008 financial crisis to satisfy the need for more transparency in the securitisation market. Their loan-level data will make it possible to assess the effect of the current crisis on securitised portfolios, in a way that would not be feasible looking only at investor reports.