Front Matter Page
COVID-19: The Regulatory and Supervisory Implications for the Banking Sector
A Joint IMF-World Bank Staff Position Note1
May 21, 2020
Executive Summary:
This note provides a set of high-level recommendations that can guide national regulatory and supervisory responses to the COVID-19 pandemic and offers an overview of measures taken across jurisdictions to date. The banking sector plays a critical role in mitigating the unprecedented macroeconomic and financial shock caused by the pandemic. Timely, targeted and well-designed regulatory and supervisory actions are essential to maintain the provision of critical financial services, particularly to households and firms that are affected most, while mitigating financial risks, maintaining balance sheet transparency, and preserving longer-term financial policy credibility. In this context, authorities should employ the embedded flexibility of regulatory, supervisory, and accounting frameworks, and encourage judicious loan restructuring while continuing to uphold minimum prudential standards. Standard-setting bodies have issued guidance to support national authorities in their efforts to provide effective, sound, and well-coordinated policy measures. Thus far, national policy measures around the world have targeted utilization of available bank capital and liquidity buffers, supporting affected borrowers, promoting balance sheet transparency, and maintaining operational and business continuity of banks as well as payment systems. However, some developing countries have fewer options at their disposal due to limited policy buffers, weaker implementation capacity, and less-sophisticated regulatory frameworks. This could explain their higher reliance on policy responses that are not consistent with the recommendations discussed in this note, which may generate new risks.
Disclaimer:
The views expressed in this Joint Staff Position Note are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF Management, nor do they necessarily reflect the views of the World Bank, its Board of Executive Directors, or the governments they represent.
This note has been prepared by an IMF-World Bank staff team guided by Aditya Narain and Nigel Jenkinson (IMF) and Alfonso Garcia Mora and Yira Mascaro (World Bank), and comprising: Dirk Jan Grolleman and Hee Kyong Chon, with inputs from the MCMFR team (IMF); and Pierre-Laurent Chatain, Erik Feyen, and Tatiana Alonso Gispert, with inputs from the FCI GP Stability Team (World Bank). Approved by Tobias Adrian (IMF) and Ceyla Pazarbasioglu (World Bank).
