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As the focus of government and businesses moves from initial response to the COVID-19 pandemic, through resilience concerns, to recovery and the new reality, financial services regulators are also expected to move into a new phase of adjustment and support.

This paper looks at financial resilience in the banking sector from a regulatory and industry perspective, from the initial measures taken to support banks and their customers, to the longer-term impact of those measures and the potential for unintended consequences.

Key topics covered in this paper include:

  • Regulatory responses to the pandemic - drivers and impacts
  • Areas of concern to banks and regulators, including:
    • Profitability challenges - low rate environment, deteriorating asset quality, non-performing loans and expected credit losses, dividend and distribution restrictions
    • Impact on regulatory buffers
    • Continuing debate around Basel implementation
  • Looking ahead to financial resilience in the new reality:
    • Potential for bank consolidation
    • Increased regulatory scrutiny around sustainable finance, operational resilience and technology 
    • Challenges for regulators - the evolving role of prudential supervisors - and the importance of continuing global cooperation