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Article Dans Une Revue Journal of Financial Stability Année : 2022

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

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Résumé

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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Dates et versions

hal-03684360 , version 1 (01-06-2022)

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  • HAL Id : hal-03684360 , 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. Journal of Financial Stability, 2022. ⟨hal-03684360⟩

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