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Archive » October 2020 » The regulatory response to the Covid-19 crisis: a test for post Gfc reforms

The regulatory response to the Covid-19 crisis: a test for post Gfc reforms

José Manuel Campa
October 2020 - n. 10
Keywords: Banks, crisis, Covid-19
Jel codes: G21, G28, I10

The regulatory reforms after the Great financial crisis have been successful, ensuring that banks entered the Covid-19 crisis in a strong position, with high capital, ample liquidity, improved asset quality, digital capacity, stronger risk management. The Eu banking sector has been resilient so far but there are challenges ahead. Notwithstanding unparalleled fiscal, monetary and supervisory measures, the economic crisis will hit the sector hard, in terms of credit quality and profitability. The 2021 stress test will allow us to better assess the consequences of the crisis. Digitalisation and the use of Ict could be a game-changer for banks. It could bring costs down and allow them to move towards more sustainable business models. The need to address overcapacity and towards consolidation will become ever more important and supervisors will support such process. Although the challenges ahead are huge, the crisis offers the chance for the banking sector to emerge stronger, more efficient and innovative.

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