Lessons From the Regulatory Response to the Covid-19 Crisis

• Published in: European economy (Roma) no. 1; pp. 89 - 106
• Main Authors: Campa, José Manuel, Quagliariello, Mario
• Format: Journal Article
• Language: English
• Published: Rome Europeye srl 01.01.2021
• Subjects: Bank loans; Banking industry; Capital requirements; Coronaviruses; COVID-19 vaccines; Economic growth; Economic recovery; Funding; GDP; Gross Domestic Product; Households; Immunization; International finance; Liquidity; Pandemics; Supervisors
• ISSN: 2421-6917; 2421-6917

Since the Great Financial Crisis (GFC), the European banking sector has made significant progress in restoring resilience and market confidence. At the beginning of 2020, while there were still significant challenges ahead - not least the structurally low profitability and pockets of idiosyncratic vulnerabilities particularly in mid-sized banks - the positive trend was robust and consolidated. Banks and supervisors were actively addressing remaining weaknesses, and market participants were expecting decisive steps towards the completion of the balance sheet repair. The exceptional measures adopted globally in response to the first wave of the epidemic have brought the global economic activity to a sudden freeze. Because of the various forms of population confinement--such as lockdowns and social distancing--the Gross Domestic Product (GDP) has markedly declined in the EU and at the global level and the path to recovery remains uncertain. The impact of Covid-19 largely depends on how successful governments are going to be in their vaccination campaigns, limiting the spread of new variants and preventing further waves.