So far, the global financial sector has only achieved little recovery from the tremendous impacts of the covid-19 pandemic. According to the Brookings-FT tracking index, many upcoming economies are still facing severe hardships even though many countries are flattening the covid 19 curve. Recovery in the international financial sector has been uneven since the second wave of the covid 19 pandemic is undermining economies’ efforts to go back to normal. Business, investors, governments, and households are shaken, but there is still hope as many countries are going a long way in creating positive monetary policy stimulus.
The EY Future Consumer Index says that the pandemic has brought more financial insecurities. More than eight people in every group of 10 are worried about their financial status in the next couple of months. The good thing is, people have learned how to make changes in how they spend to shore up their finances. Banks will play a significant role in assisting consumers in regaining back their financial security while at the same time propelling economic recovery.
Nevertheless, central banks have acted to address such challenges, for instance, extending bond purchasing programs and lowering policy rates to address financial liquidity changes. According to news sources such as Karl Scranz, more policy measures must address the covid 19 impacts to rebuild the global financial sector. Some of the steps they can take include:
Expand Central Bank Liquidity Support
Central banks across the international financial sector have so far implemented actions to offer more monetary policy accommodation to facilitate sufficient liquidity to support well-progressing markets. For instance, central banks should consider their terms of programs so that indebted corporates facing acute liquidity problems are given the much-needed liquidity. At the same time, financial authorities may consider minimizing non-performing assets’ challenges through measures such as asset-disposal vehicles, which have been utilized in previous financial crises.
Immediate Fiscal to Support Viable Businesses
Fiscal should implement some measures to address the rising insolvency concerns such as:
- Facilitating more targeted spending directed to affected businesses to bring back business confidence and consequently strengthen the markets.
- Implement a channel of debt, equity, and credit guarantees to affected businesses, such as reducing the obstacles of cash transfers in businesses to provide instant funds to businesses.
Conditional Regulatory Relief
Financial authorities can also boost their recovery by considering conditional regulatory relief, for example, permitting delays in public filings. In addition to that, authorities can emphasize that public issuers offer investors insights about the plans for addressing material risks to their investments resulting from the pandemic’s impacts.
Emphasize The Importance of Sufficient Liquidity
The international financial sectors must reiterate the importance of sufficient liquidity buffers in investment money and other vehicles. That should be a precautionary measure where investment funds are going into less liquid markets. This can be managed through international and domestic guidelines while still considering liquidity risk practices regarding regulated funds.
Easing Repayment Terms for Businesses
Another way to boost economic recovery post covid 19 is by having banks ease repayment terms for businesses and households. Fiscal authorities can provide banks with incentives to implement financial intermediation in periods of uncertainty.
The Final Thoughts
The international financial services sector must facilitate comprehensive and coordinated efforts across countries to boost quick economic recovery post the pandemic and restore financial confidence.