When and how to unwind COVID-support measures to the banking system?

Abstract:

Designing exit strategy requires judgment, coordination among different institutions, and graduality. Restoring banks’ balance sheet transparency is a first-order objective. To this end, borrower relief measures should be phased out ahead of the other measures. Relaxation of loan classification and provisioning policies can be lifted in a second stage. The last one to be unwounded would be capital relief initiatives. To provide banks time and space of manoeuvre, exit strategies needs to be communicated in a clear and timely manner.

Further information:

This paper was prepared by the Economic Governance Support Unit (EGOV) at the request of the Committee on Economic and Monetary Affairs (ECON).

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