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

47 Pages Posted: 30 Jun 2021 Last revised: 8 Jul 2021

See all articles by Alice Abboud

Alice Abboud

Board of Governors of the Federal Reserve System

Elizabeth Duncan

Board of Governors of the Federal Reserve System

Akos Horvath

Board of Governors of the Federal Reserve System

Diana A. Iercosan

Board of Governors of the Federal Reserve System

Bert Loudis

Board of Governors of the Federal Reserve System

Francis Martinez

Board of Governors of the Federal Reserve System

Timothy Mooney

Board of Governors of the Federal Reserve System

Benjamin Ranish

Board of Governors of the Federal Reserve System

Ke Wang

Board of Governors of the Federal Reserve System

Missaka Warusawitharana

Board of Governors of the Federal Reserve System

Carlo Wix

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: April, 2021

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.

Suggested Citation

Abboud, Alice and Duncan, Elizabeth and Horvath, Akos and Iercosan, Diana A. and Loudis, Bert and Martinez, Francis and Mooney, Timothy and Ranish, Benjamin and Wang, Ke and Warusawitharana, Missaka and Wix, Carlo, Covid-19 as a Stress Test: Assessing the Bank Regulatory Framework (April, 2021). FEDS Working Paper No. 2021-24, Available at SSRN: https://ssrn.com/abstract=3872399 or http://dx.doi.org/10.17016/FEDS.2021.024

Alice Abboud (Contact Author)

Board of Governors of the Federal Reserve System

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Elizabeth Duncan

Board of Governors of the Federal Reserve System

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Akos Horvath

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://https://www.federalreserve.gov/econres/akos-horvath.htm

Diana A. Iercosan

Board of Governors of the Federal Reserve System

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Bert Loudis

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Francis Martinez

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Timothy Mooney

Board of Governors of the Federal Reserve System

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Benjamin Ranish

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Ke Wang

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Missaka Warusawitharana

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Carlo Wix

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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