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Pré-publication, Document de travail

A note on regulatory responses to COVID-19 pandemic: Balancing banks' solvency and contribution to recovery

Abstract : We see spikes in unemployment rates and turbulence in the securities markets during the COVID-19 pandemic. Governments are responding with aggressive monetary expansions and large-scale economic relief plans. We discuss the implications on banks and the economy of prudential regulatory intervention to soften the treatment of non-performing loans and ease bank capital buffers. We apply these easing measures on a sample of Globally Systemically Important Banks (G-SIBs) and show that these banks can play a constructive role in sustaining economic growth during the COVID-19 pandemic. However, softening the treatment of non-performing loans along with easing capital buffers should not undermine banks' solvency in the recovery period. Banks should maintain usable buffer in the medium-term horizon to absorb future losses, as the effect of COVID-19 on the economy might take time to fully materialise.
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Pré-publication, Document de travail
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https://hal-unilim.archives-ouvertes.fr/hal-02964598
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Soumis le : lundi 12 octobre 2020 - 15:26:47
Dernière modification le : mercredi 14 octobre 2020 - 03:34:39

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  • HAL Id : hal-02964598, version 1

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Mohammad Bitar, Amine Tarazi. A note on regulatory responses to COVID-19 pandemic: Balancing banks' solvency and contribution to recovery. 2020. ⟨hal-02964598⟩

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