Descriptions
Governments, central banks, regulatory authorities, and other policymakers have played a pivotal role in easing the economic and financial conditions in response to the COVID-19 shock, and they have helped avert a catastrophic downturn. Even with vaccination now on its way in several countries, the virus is still raging on, and policymakers cannot rest on their laurels. As we look ahead to the rest of the year, and even into 2022, the longer the virus continues to impact our lives, the more businesses and consumers are likely to continue struggling, and consequently, the risk of debt defaults becomes higher. Before the domino-chain of NPLs gains momentum and countries spiral into widespread financial crisis, policymakers must continue to be vigilant. To avert this undesirable outcome, more monetary stimulus may be needed to support economic recovery, and central banks are implementing innovative new strategies to provide it.
Somewhat like the 2008 Great Financial Crisis, a familiar feedback loop is on the horizon: high leverage and depressed growth will amplify financial sector vulnerabilities in the months ahead. At the start of the global pandemic, banks were characterised as entering the crisis with stronger liquidity and capital buffers thanks to post GFC regulatory reforms, but they are far from immune. Stimulus measures put in place by policymakers to soften the blow of the COVID-19-induced economic shutdown must eventually come to an end or taper off. The question of when and how to phase out the measures does not have a simple answer. Nevertheless, the general principle should be to unwind them as soon as conditions permit. This could be done by gradually narrowing down the range of borrowers eligible for support so that only the viable enterprises and deeply-affected households are supported.
The purpose of SEACEN’s Online Seminar on COVID-19 Economic Stimulus and Averting Cliff Effects in Asia is to explore the following:
1. What happens when economic stimulus runs out or is tapered off?
2. Will there be a “cliff” or “gap”?
3. What strategies do banks have in place to avert the “cliff effect”?
4. Will banks remain resilient?
The speaker is Ms. Rebaca Tan, an Assistant Vice President - Analyst for the Financial Institutions Group in Asia, Moody's Investors Service. Based in Singapore, Rebaca is responsible for the credit ratings of financial institutions in Vietnam and Thailand. Prior to joining Moody’s, Rebaca worked as a banking regulator at the Monetary Authority of Singapore. Rebaca holds a Bachelor in Accountancy (Honours) from Nanyang Technological University.
