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When and how to unwind COVID-support measures to the banking system?
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...
Abstract
There is no “one-size-fits-all” strategy to achieve viable profitability, but all banks need good strategic steering and risk management capabilities to adjust their business mix to changes in the operating environment. Banks have already taken actions to enhance profitability and the room of manoeuvre for the future is not that ample. Policy makers can take further initiatives to fix structural inefficiencies and provide better conditions for banks to enhance profitability. These concerted actions would help reduce the gap between banks’ return on equity and cost-of-equity.
This document was provided by the Economic Governance Support Unit at the request of the ECON Committee.