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Releasing bank buffers to cushion the crisis - a quantitative assessment

Author

Listed:
  • Ulf Lewrick
  • Christian Schmieder
  • Jhuvesh Sobrun
  • Elod Takats

Abstract

Banks globally entered the Covid-19 crisis with roughly US$ 5 trillion of capital above their Pillar 1 regulatory requirements. The amount of additional lending will depend on how hard banks' capital is hit by the crisis, on their willingness to use the buffers and on other policy support. In an adverse stress scenario such as the savings and loan crisis, banks' usable buffers would decline to US$ 800 billion, which could support US$ 5 trillion of additional loans (6% of total loans outstanding). Yet in a severely adverse scenario, similar to the Great Financial Crisis, the corresponding figures would be only US$ 270 billion and US$ 1 trillion (1.3% of total loans).

Suggested Citation

  • Ulf Lewrick & Christian Schmieder & Jhuvesh Sobrun & Elod Takats, 2020. "Releasing bank buffers to cushion the crisis - a quantitative assessment," BIS Bulletins 11, Bank for International Settlements.
    • Handle: RePEc:bis:bisblt:11
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    Cited by:

    1. Bryan Hardy & Elod Takats, 2020. "International banking amidst Covid-19: resilience and drivers," BIS Quarterly Review, Bank for International Settlements, December.
    2. Leonardo Gambacorta & Tommaso Oliviero & Tommaso Hyun Song Shin, 2020. "Low price-to-book ratios and bank dividend payout policies," BIS Working Papers 907, Bank for International Settlements.

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