The Covid-19 pandemic has impacted all the economies, big or small, across the globe. Central banks everywhere have been proactively dealing with the situation and have successfully pushed a large amount of liquidity to the banks through various means. However, due to widespread uncertainty caused by the pandemic, banks are reluctant to lend, and consumers are hesitant to avail credit. This article highlights the adverse impact that surplus liquidity may have on the banks and economies if adequate demand is not created.
Digital payments promise greater convenience and efficiency with lower cost but also carry substantial potential risk to the economy at large. The long-term success of this innovation will depend on the development of a top-down, holistic regulatory framework to securely govern digital payments, maximizing benefits while minimizing risks.
The COVID-19 crisis proved how nimbly governments could step up to the plate to support the private sector. But have they done too good a job, becoming the source of all things to eagerly waiting firms, including banks, at the expense of self-reliance? What type of capitalism do we have if governments are omnipresent? As debts levels continue to grow, is equity the solution for “sunflower capitalism”?
Effective monetary policy undergirds price stability, and the complex synergy of many moving parts in today’s crisis-prone world presents new challenges to innovate as traditional instruments reach their limits. The European Central Bank has responded by introducing new tools to its toolbox, chief amongst them being policy rates, quantitative easing and targeted longer-term refinancing operations, which have pushed the boundaries, but the interaction between the policy instruments could be unpredictable.
For the world’s economy, 2021 hasn’t yet brought a break from 2020; COVID-19 remains dominant. Although all banking systems are vulnerable to upheaval, the situations for those in emerging markets are more tenuous for several reasons. S&P Global Ratings examined the three major risks facing a sample of 15 EM countries, including likely deterioration in asset quality, geopolitical and domestic policy uncertainty and vulnerability to abrupt changes in investor sentiment.
As calamitous as the pandemic’s effect has been on economies worldwide, in many cases, it has only fueled concerning issues that pre-dated it. COVID-19 will eventually be consigned to our past, but its effects will linger on for decades. What are the four questions we need to ask ourselves now to shape the best plan of action toward economic healing, sustained recovery, innovation, cooperation and prosperity while avoiding potential landmines?
It has been an unusually eventful year for central banks all over the world in 2020, and given the current circumstances, the coming year is set to be no less busy. With a variety of challenges to overcome, therefore, central banks hope to achieve several important goals before the end of 2021.
The role of the central bank in maintaining the stability of a nation’s financial system is paramount at all times, but especially during a crisis of the magnitude of COVID-19. Around the world, policymakers have intentionally shut down their economies for the greater good of public health. What specific emergency measures have the world’s top central banks taken to confront this truly unique peril to both physical and financial well-being?
2020 has proved to be an eventful year for ISO 20022, with SWIFT (Society for Worldwide Interbank Financial Telecommunication) and other major market infrastructures opting to postpone the implementation of the new standard. Any assumptions that these delays will provide participants with a respite are unfounded; testing times still lie ahead, and internal project work should reflect this.
Emerging Markets Are Pressed for Liquidity, but Central Banks Don’t Issue the Currency They Need the Most
The COVID-19 crisis has been most challenging for emerging-market economies, those that least needed a new challenge as they were vulnerable before the crisis began. Liquidity support from central banks is crucial, but their help is often not in the hard currency required. The guardian of global financial stability, the IMF, will need more support from its members to fulfill its role as the true lender of last resort.