The global financial system has weathered the pandemic due to greater resilience, supported by the G20 reforms, and a “swift, determined and bold international policy response,” according to a new interim report from the Financial Stability Board.
The banking sector’s resilience can be attributed, in part, to the adoption of Basel III reforms, the FSB said in its report, adding that “from 2013 to the end of 2019, banks’ capital, leverage and liquidity positions improved as reforms were implemented…most banks entered the pandemic with capital and liquidity levels well above minimum regulatory levels.”
Significant progress in addressing the too-big-to-fail problem also added to bank resilience, according to the report. Systemically important banks in advanced economies have built significant loss-absorbing and recapitalization capacity by issuing instruments that can bear losses in the event of resolution.
FSB added that recovery and resolution planning have also improved the operational capabilities of banks and authorities, and supported risk management on a cross-border basis through enhanced liquidity monitoring and reporting.