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COVID-19 as a Stress Test: Assessing the Bank Regulatory Framework

Alice Abboud, Elizabeth Duncan, Akos Horvath, Diana A. Iercosan, Bert Loudis, Francis Martinez, Timothy Mooney, Ben Ranish, Ke Wang (), Missaka Warusawitharana () and Carlo Wix ()
Additional contact information
Akos Horvath: https://www.federalreserve.gov/econres/akos-horvath.htm
Diana A. Iercosan: https://www.federalreserve.gov/econres/diana-a-iercosan.htm
Ben Ranish: https://www.federalreserve.gov/econres/ben-ranish.htm

No 2021-024, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: The widespread economic damage caused by the ongoing COVID-19 pandemic poses the first major test of the bank regulatory reforms put in place following the global financial crisis. This study assesses this framework, with an emphasis on capital and liquidity requirements. Leading up to the COVID-19 crisis, banks were well-capitalized and held ample liquid assets, reflecting in part heightened requirements. Capital requirements were comparable across major jurisdictions, despite differences in the implementation of the international Basel standards. The overall robust capital and liquidity levels resulted in a resilient banking system, which maintained lending through the early stages of the pandemic. Furthermore, trading activity was a source of strength for banks, reflecting in part a prudent regulatory approach. Areas for potential improvement include addressing the cyclicality of requirements.

Keywords: Bank capital; Banking regulation; Liquidity (search for similar items in EconPapers)
Pages: 47 p.
Date: 2021-04-06
New Economics Papers: this item is included in nep-cba and nep-rmg
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2021-24

DOI: 10.17016/FEDS.2021.024

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