How should banking supervisors handle COVID-19 crisis?

Supervisory authorities have generally reacted swiftly to the COVID-19 pandemic, deploying support measures such as debt repayment postponement, stimulus packages, and credit guarantees. In some jurisdictions, supervisory authorities also provided capital, liquidity and operational relief to banks. So far, these measures have helped mitigate some of the short-term financial stability risks. However, in many countries, […]

Climate-Related Prudential Risks in the Banking Sector and Emerging Regulatory and Supervisory Practices

This post is the latest in our special issue: “Climate Change and Financial Markets – Risk, Regulation, and Innovation.” To learn more about the special issue and the work of the Global Financial Markets Center around climate change and financial markets, please read the special issue’s introduction here. And to review all The FinReg Blog […]

“Liquidity at Risk” and Joint Stress Testing for Solvency and Liquidity Risks

The stress-testing of banks is a key element of banking regulation and supervision. While the Global Financial Crisis of 2007-2008 clearly showed that bank failure may result from a lack of short-term liquidity rather than solvency, supervisory stress tests in most countries continue to focus more on solvency. Traditionally, stress tests seek to assess banks’ […]

Responsible Banking Should Not Remain Just a Global Slogan

Courtesy of Mete Feridun As the COVID-19 pandemic continues to threaten the global economy and financial markets, the global banking sector is approaching a tipping point for changing its overall culture and behaviour towards a more responsible banking model. This is because it is increasingly clear that recovery from the COVID-19 crisis will take longer […]

“Basel V” Should Target the “Green Swan”

Courtesy of Mete Feridun Recently, the Bank for International Settlements (BIS) coined the term “green swan” to refer to the tail risks posed by climate change to financial stability. Although inspired by Nassim Nicholas Taleb’s “black swan,” the moniker of unexpected risks, the BIS argues that the green swan is hardly similar to the black […]

COVID-19 Should Not Jeopardize the Implementation of Basel IV

Courtesy of Mete Feridun While it is important to consider which regulatory measures may alleviate the impact of the COVID-19 pandemic, it is equally important not to allow the pandemic to derail the planned implementation of future regulations. The complex final phase of the Basel III reforms—referred to as “Basel IV” by the industry—are especially […]

COVID-19 Outbreak Requires Prompt and Innovative Regulatory Response

Courtesy of Mete Feridun The COVID-19 outbreak has resulted in a significant and sudden decline in economic and financial activity across the world, bringing back bad memories of the 2007-2008 global financial crisis. There are indeed strong similarities between the current COVID-19 pandemic and the 2007-2008 crisis, particularly in terms of capital market dysfunction, uncertainty, […]

The New EU Prudential Regime for Investment Firms and What It Means for Firms

Courtesy of Mete Feridun  Disclaimer: The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official views and opinions of PwC.  The Official Journal of the European Union published the prudential framework for investment firms (Investment Firms Review – IFR) on 5 December 2019. Applying to all MiFID […]

Addressing Systemic Risks from the Procyclicality of Collateral Requirements in Derivatives Markets and SFTs

Courtesy of Mete Feridun  Disclaimer: The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official views and opinions of PwC.  Post-crisis regulatory reforms have resulted in the majority of derivatives being cleared through central counterparties (CCPs) or subject to bilateral collateral requirements, such as the […]

SCCyB vs CCyB: Macroprudential substitutes or complements?

Courtesy of Mete Feridun  Under Basel III, national authorities are allowed to introduce additional capital requirements of up to 2.5% of total risk-weighted assets to ensure that their respective national banking systems have an additional buffer of capital. This buffer provides protection against potential future losses that may arise during downward phases of credit cycles, while simultaneously […]