High-rise buildings in Frankfurt photographed from below ©Westend61 / Martin Moxter

Banking supervision aspects of the coronavirus pandemic

The measures to contain the coronavirus have huge implications for the economy – and hence also for the banking sector.

“Credit institutions are increasingly being affected by risks. In this situation, the considerable strengthening of their capital base and liquidity buffers since the financial crisis is paying off,” commented Bundesbank Executive Board member Joachim Wuermeling.

Banking supervisors at all levels – international, European and national – have responded swiftly and shown flexibility. The supervisory measures as well as the parallel fiscal and monetary policy measures are intended to support institutions in maintaining operations and covering the economy’s borrowing needs.

At the same time, we are looking at ensuring that the banks remain stable in spite of the added challenges. That’s why none of the temporary relief is shaking the supervisory pillars, particularly in the area of risk identification and risk management,” said Mr Wuermeling.

Given the high degree of uncertainty about how events will continue to unfold, supervisors are regularly adapting their measures. Both the EBA stress test and the LSI stress test have been postponed, for example. More information on this topic can be found on the websites of the Federal Financial Supervisory Authority (BaFin), the ECB, the European Banking Authority (EBA) and the Basel Committee on Banking Supervision (BCBS).