COVID-19: The Regulatory and Supervisory Implications for the Banking Sector
Worldwide Financial Fund. Financial and Capital Markets Division
Might 21, 2020
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This observe gives a set of high-level suggestions that may information nationwide regulatory and supervisory responses to the COVID-19 pandemic and gives an summary of measures taken throughout jurisdictions thus far. The banking sector performs a important position in mitigating the unprecedented macroeconomic and monetary shock brought on by the pandemic. Well timed, focused and well-designed regulatory and supervisory actions are important to take care of the availability of important monetary companies, significantly to households and corporations which can be affected most, whereas mitigating monetary dangers, sustaining steadiness sheet transparency, and preserving longer-term monetary coverage credibility. On this context, authorities ought to make use of the embedded flexibility of regulatory, supervisory, and accounting frameworks, and encourage even handed loan restructuring whereas persevering with to uphold minimal prudential requirements. Customary-setting our bodies have issued steering to assist nationwide authorities of their efforts to supply efficient, sound, and well-coordinated coverage measures. So far, nationwide coverage measures all over the world have focused utilization of obtainable bank capital and liquidity buffers, supporting affected debtors, selling steadiness sheet transparency, and sustaining operational and enterprise continuity of banks in addition to fee methods. Nevertheless, some growing international locations have fewer choices at their disposal as a consequence of restricted coverage buffers, weaker implementation capability, and less-sophisticated regulatory frameworks. This might clarify their increased reliance on coverage responses that aren’t in step with the suggestions mentioned on this observe, which may generate new dangers.