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The COVID-19 pandemic presents a tremendous challenge to policymakers around the world. The Institute of International Finance (IIF), which represents more than 450 financial firms across 70 countries, stands ready with the industry to continue supporting the overall economy and affected communities. To that end, we applaud the large scale, creative, and broad-based responses that policymakers have taken thus far in the face of this unprecedented health crisis.
However, with the COVID-19 pandemic continuing to cause significant pressures on markets, creating dislocations and impacting the adequate functioning of credit markets, in short time, policymakers may need to move to new realms of response – including targeted supervisory and regulatory policy measures.
In doing so, we must remember that today’s global financial system is governed by a regulatory framework defined by global standards. More than ever, it is essential that potential decisions regarding interpretation, adjustments, and tailoring of regulations be properly coordinated, leveraging the work of global standard setters such as the Financial Stability Board, the Basel Committee, IOSCO and the IAIS. Such measures refer to essential elements of the global capital and liquidity framework for banks such as capital and liquidity buffers and the treatment of provisions, just to name a few. Coordinated action would ensure not only greater effectiveness of measures that ultimately apply to global markets, but also a level playing field by minimizing competitive distortions.
While national and regional financial markets are currently facing specific and idiosyncratic challenges, the response by policymakers bears similar characteristics around fiscal stimulus, financing structures, credit and guarantee facilities and monetary policy interventions. Similarly, regulatory and supervisory authorities have begun to take urgent steps to provide the necessary conditions for banks and other financial services firms to be able to continue addressing the liquidity, credit, investment and risk management needs of consumers, small and medium enterprises, corporate customers, and policyholders.
The just announced extraordinary virtual G20 Leaders’ Summit is a positive step to advance a coordinated response to the COVID-19 pandemic and its human and economic implications, but it can’t be the last. No one country or region can overcome this challenge alone. We live in an integrated global system and anything short of a global, integrated approach will prove unsuccessful.