Data to deal with Bank distress

Posted on December 18, 2020 by Editor

One of the reasons to collect and collate financial data through regulatory reporting is to make sure essential information is available to regulators in case of bank distress. But can policy-makers use the same data to understand which policy approaches might help reduce the impact of bank stress on the wider economy?

Recent research from the Bank of International Settlements (BIS) presents a new database of historical financial policy interventions designed to mitigate the impact of bank distress. Tracking 29 countries over 36 years, the database shows that policy interventions (such as central bank lending, asset purchases, bank liability guarantees and impaired asset segregation schemes) can help restore GDP growth and normalise the economy – particularly when bank distress follows a period of high cross-border exposures. Perhaps not surprisingly, the study seems to indicate that to be effective, central bank action needs to be both swift and significant.

Read the research paper here.

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