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.