"For 2020 we estimate that credit losses for these banks
would absorb about 75% of their preprovision earnings. Under our base case, this ratio improves to about 40% in 2021." Asia-Pacific is expected to account for $1.2 trillion of the losses in 2021, with three quarters of that from China.
In terms of customer loans, the Chinese banking system is approximately the same size as the US, Japanese, German, and British banking systems combined, and tends to play a more important role in the supply of credit to the economy.
North America's regions are forecast to account for a further $366 billion of the increase, followed by $228 billion in Western Europe, $142 billion in Eastern European, the Middle East and Africa and $131 billion in Latin America.
"Should the COVID-19 pandemic prove to be worse or last longer than S&P's base case economic forecasts assume, then a combination of higher credit losses and lower earnings will inevitably hit banks across the world," S&P's report said.
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