the prudential response to the covid-19 crisis · percentage share of bcbs member jurisdictions....
TRANSCRIPT
The prudential response to the Covid-19 crisisClaudio BorioHead of the Monetary and Economic Department Basel, Switzerland, 30 June 2020
A unique crisis
2
3
Banks entered the crisis with higher capital…
Capitalisation of major international banks
0
5
10
15
20
25
9.5 11.5 13.5 15.5 17.5 19.5 21.5 23.5 25.5 27.5
%
2006Share of banks in the respective bucket: 2019 2006Median: 2019
Total capital ratio (% of risk-weighted assets)
A unique crisis
4
5
…facilitating the unprecedented prudential response
Countries taking prudential measures
Countercyclical buffer release
Other capital requirements
Payout restrictions
Liquidity requirements
Asset classification and provisioning
0 20 40 60 80 100%
Percentage share of BCBS member jurisdictions
6
Banks acted as shock absorbers
7
Credit expanded considerably more during this crisis than during the GFC
–4
–2
0
2
4
GFC Covid-19 GFC Covid-19
United States Euro area% pts
Pre-GFC = 1 year to Aug 2008; Pre-Covid = 1 year to Jan 2020GFCDifference in pre- and post-crisis average yoy credit growth: Covid-19
Three challenges
8
9
…facilitating the unprecedented prudential response
Countries taking prudential measures
Countercyclical buffer release
Other capital requirements
Payout restrictions
Liquidity requirements
Asset classification and provisioning
0 20 40 60 80 100%
Percentage share of BCBS member jurisdictions
10
Blanket dividend restrictions
11
Banks are under pressure…
Banks’ stock underperformRating outlooks deteriorateProvisions spike
0
18
36
54
72
90
2018 2019 2020
USD bn
United StatesOther AEs
Banks’ loan loss provisions:European AEsEMEs
60
68
76
84
92
100
Mar 2020 May 2020
19 Feb 2020 = 100
WorldEquity index: Banks
0
12
24
36
48
60
Mar 2020 May 2020
No of banks
Banks’ negative rating outlook
12
…and buffers are limited if the crisis persists
Depletion of capital under a severe stress scenario
0
4
8
12
Pre-crisis Severely adverse stress scenario
%
Minimum Basel III requirement (CET1) Capital buffers
13
Banks’ profitability is structurally low
0
1
2
3
02 04 06 08 10 12 14 16 18 20
Ratio
10th–90th percentilesBank price-to-book ratio: Average
Final considerations
14