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

50 Pages Posted: 18 Nov 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: November 17, 2021

Abstract

The broad economic damage of the COVID-19 pandemic poses the first major test of the bank regulatory reforms put in place after the Global Financial Crisis. Our study assesses the U.S. regulatory framework, with an emphasis on capital and liquidity requirements. Prior to the COVID-19 crisis, banks were well-capitalized and held ample liquid assets, which partly reflects enhanced requirements. The overall robust capital and liquidity levels resulted in a resilient banking system, which maintained lending and market making through the early stages of the pandemic. Trading activity was a source of strength for banks, reflecting in part a prudent regulatory approach. That said, leverage requirements are associated with more repo position netting by banks, with potential implications for market making.

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 (November 17, 2021). FEDS Working Paper No. 2021-024, Available at SSRN: https://ssrn.com/abstract=3965801 or http://dx.doi.org/10.2139/ssrn.3965801

Alice Abboud

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 (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
360
Abstract Views
1,341
Rank
144,212
PlumX Metrics