Seminar on Covid-19 Related Measures: Effectiveness and Exit

The Seminar is part of the interinstitutional collaboration agreement between the Financial Stability Institute (FSI) of the Bank for International Settlements (BIS) and the Center for Latin American Monetary Studies (CEMLA) that has taken place since 2016. As part of the agreement, an annual seminar is conducted with focus on technical approaches to prudential topics in financial stability with a regional perspective.

The Seminar was held on a digital format on February 9 and 10, 2022, and was attended by 68 representatives from 29 institutions and associates of CEMLA. The event was focused on the following topics: the usage of countercyclical capital buffers (CCyB) in a crisis and the re-building of buffers after a crisis, and the macro- and microprudential policy mix.

After the Global Financial Crisis, the regulatory reforms, including the implementation of a CCyB and other macroprudential policies, led to an overall sustained increase in the resilience of the global financial system in the last decade and allowed entering into the Covid-19 crisis with higher capital levels.

To accommodate the needs originated by the exceptional conditions due to the crisis, many financial regulators released capital by reducing banks’ CCyB requirement, if they had built up buffers before the crisis. The CCyB application requires a constant tuning and adaptation to the economic cycle. This tuning is also served by an adequate sending of the signals to the financial environment by the financial regulators. For instance, prompt reinstating of higher CCyBs could have counterintuitive effects in next episodes. Another issue are the specificities of troubled institutions: a high CCyB may diminish the short-term resilience of an institution, forcing it into an early liquidation; a low CCyB could allow further deterioration of its balance sheet.

The discussion about policy measures adopted to mitigate the effects of the Covid-19 crisis included the manner of its implementation, with a preference for timeliness and decisiveness. It also included the scale and scope of applications, usually involving a mixture of macro- and microprudential policies from the fiscal or monetary authorities. The magnitude of these measures has been exceptional for many jurisdictions, and it paved the way for faster recoveries with uninterrupted liquidity and lending.

• Statement of Finansinspektionen (Financial Supervisory Authority of Sweden) about setting the Countercyclical Capital Buffer.
• Information on the implementation and current level of CCyB across jurisdictions by the Bank for International Settlements.
• Regulation for the implementation of a Countercyclical Capital Buffer in Uruguay by the Superintendencia de Servicios Financieros (Financial Supervisory Authority of Uruguay); available in Spanish.
• Financial Stability Report by Banco Central do Brasil Oct 2021 (Ed. 20, Vol. 2), esp. Chapter 2.1 Overview of emergency credit programs.
• Financial Stability Report by Banco Central do Brasil Oct 2020 (Ed. 19, Vol. 2), esp. Chapter 2.1 Role of the BCB in ensuring financial stability during the Covid-19 crisis
• Overview of exceptional measures taken by Banco Central de Chile in response to the Covid-19 crisis.
• Financial Stability Reports by Banco Central de Chile:
  See for example: FSB 2020 Second Half, Boxes “Effects of FOGAPE-Covid loans on firms during the pandemic and the associated risks” and “Measures to face the pandemic and the role of the financial system”.
• FSB 2021 First Half, Boxes “Evolution of Liquidity during the Pandemic”.