Prepare your COVID emergency exit plan, says regulator at G20

LONDON (Reuters) – Although ending COVID economic aid measures too soon would pose more of a threat to financial stability than leaving them in place for too long, it was time for G20 countries to decide how it should be done, the Financial Stability Board said on Tuesday.

FILE PHOTO: Euro, Hong Kong dollars, US dollars, Japanese yen, British pounds and 100 Chinese yuan banknotes are seen in this illustration, in Beijing, China January 21, 2016. REUTERS / Jason Lee / File Photo

The FSB, which coordinates the financial rules of the G20 group of rich countries, said the swift, significant and sweeping measures introduced by governments over the past year have limited the economic fallout from the COVID-19 shock, but their phase-out will also present risks given persistent uncertainties.

Despite the arrival of vaccines, the withdrawal of relief measures is not imminent given that the pandemic is worse in some countries than had been anticipated a few months ago, said the FSB.

In a report aimed at helping G20 countries exit measures, the FSB recommended a flexible approach that gradually withdraws relief in a sequenced fashion to avoid a “cliff edge” effect of simultaneous expirations.

Withdrawals could be based on reducing the scope of relief measures, forcing beneficiaries to register for them, making aid less and less generous and ordering the expiration of various reliefs.

A “conditional to state” approach rather than a pre-announced withdrawal schedule could help minimize long-term financial stability risks, the FSB said.

“For many support measures, the authorities must decide to extend, modify or cancel them,” said the FSB in its report to the G20 finance ministers meeting almost this week.

“The premature withdrawal of temporary measures designed to support bank lending could lead to an unintentional tightening of bank lending.” (Graphic: FSBCOVID Chart,)

FSB Chairman Randal Quarles said in a letter to G20 members that there were signs of an “inflection point” emerging as vaccines are rolled out, albeit at different rates.

“While it is good practice to keep in place the measures that support the stability of the financial system and the financing of the real economy for as long as necessary, the factors to be taken into account when deciding to expand, modify and possibly , to end the support measures take shape, ”said Quarles, who is also vice chairman of oversight at the US Federal Reserve.

Reporting by Huw Jones; Editing by Steve Orlofsky

Source link

About Johnnie Hill

Johnnie Hill

Check Also

Triad Companies Earn At Least $ 5 Million In Federal Paycheck Protection Loans | Business

Fever Several Triad companies, including K&W Cafeteria Inc. and The Budd Group, have secured loans …