WAIFC Publication on the "Impact of COVID-19 on the Future of Banking Regulation"
A new report from the World Alliance of International Financial Centers (WAIFC) on the challenges raised by the post-COVID era on banking regulation was released today. In particular, it welcomes the regulatory flexibility provided at the onset of the COVID outbreak. The report underlines the need to assess whether such measures should be extended, adjusted, or reviewed to ensure that they are effective while preserving prudent risk measurement.
The report, 'Impact of COVID-19 on the Future of Banking Regulation,' makes the case that some regulatory flexibility should be maintained and, if necessary, adjusted as long as the world economy has not recovered to its pre-pandemic level. Among other recommendations, the report recommends that the implementation of measures such as the final Basel III agreement should not result in a significant capital increase that could impact the economic recovery, particularly in jurisdictions that rely significantly on bank financing.
The report explains that contrary to what happened following the 2008-2009 global financial crisis, the current COVID-led crisis has exogenous origins. This time, the financial industry plays a crucial role and is seen as part of the solution. While both public and private debt ratios have increased, the urgency in financing large investment needs in developed or emerging countries also gives additional responsibilities to financial players.
Commenting on the release of this report, Jennifer Reynolds, Chair of the WAIFC, said:
"During the pandemic, the financial sector played an important role in providing economic support to individuals and small businesses. It is important that the regulatory environment for the financial sector continues to support the global economic recovery."
Arnaud de Bresson, Member of the WAIFC Board and CEO at Paris Europlace, said:
"Current extraordinary circumstances clearly make a case for financial institutions to devote more capital and resources to the ongoing economic rebound to foster sustainable growth. Therefore, financial regulators must strike the right balance between further increasing financial sector resilience and supporting sound risk-taking by financial firms to finance innovation, energy transition, and job creation."
Philippe Richard, Member of the WAIFC Board and Executive Director at Abu Dhabi Global Market, said:
"A well-balanced and proportionate regulation ensuring financial stability while supporting the economic recovery is critical in these extraordinary and uncertain circumstances."
Dr. Jochen Biedermann, Managing Director of the WAIFC, added:
"Financial institutions have played an essential role in supporting the real economy in the current crisis, working closely with governments as they have extended lending to households and businesses to mitigate the adverse effects of COVID-19. This essential support should continue. We even need additional lending to finance the recovery and foster the transition to a greener economy."
You can download the report at https://waifc.finance/publications/.
The World Alliance of International Financial Centers (WAIFC) is a non-profit association registered in Belgium, representing 20 leading international financial centers of four continents. WAIFC members are city governments, associations, and similar institutions developing and promoting their financial centers.
WAIFC facilitates cooperation between its members, the exchange of best practices, and communication with the general public.