Under these unprecedented circumstances, central banks and governments enacted a wide range of policy interventions. While some measures were aimed at reducing the sharp tightening of financial conditions in the short term, others sought to support the flow of credit to firms, either by direct intervention in credit markets (e.g., government-sponsored credit lines and liability guarantees) or by relaxing banks\u2019 constraints on the use of capital buffers.<\/p>\n
While credit institutions are being called to play an important countercyclical role to support the real sector, these actions also have a series of implications for the future resilience of the banking sector. For instance, as lenders exhaust their existing buffers, they might also experience deterioration of asset quality, threatening the systems\u2019 stability. As the crisis is expected to continue, even after the lockdowns are lifted and economies start to reopen, the net effect of these policy measures on the banking sector is largely unknown.<\/p>\n","protected":false},"excerpt":{"rendered":"
To reduce the spread of the novel COVID-19, governments enacted mitigation strategies based on social distancing, national quarantines, and shutdown of non-essential businesses. The halt to the economy represented a large shock to the corporate sector, which had to scramble for cash to cover operating costs as a result of the revenue shortfall. The financial sector, and banks in particular, are expected to play a key role in absorbing the shock by supplying much-needed funding.<\/p>\n","protected":false},"featured_media":46418,"template":"","meta":{"pmpro_default_level":"","tdm_status":"","tdm_grid_status":""},"product_brand":[],"product_cat":[766,2347],"product_tag":[3475,2353],"class_list":["post-76110","product","type-product","status-publish","has-post-thumbnail","product_cat-strategy-en","product_cat-study-library","product_tag-2016-2020","product_tag-world-bank","pmpro-has-access","first","instock","shipping-taxable","product-type-external"],"yoast_head":"\n