The Basel III framework includes capital and liquidity buffers that are designed to be used in periods of stress. These include the capital conservation buffer and, by extension, the countercyclical capital buffer and buffers for systemically important banks. They also include banks’ stock of high-quality liquid assets (HQLA). Using capital resources to support the real economy and absorb losses should take priority at present over discretionary distributions. HQLA stocks should be used to meet liquidity demands. Many supervisors are already encouraging banks to make use of these tools, which allow for flexibility in responding to the current circumstances.
The Committee is continuing to assess and address the banking and supervisory implications of Covid-19, and is actively coordinating with the Financial Stability Board and other standard setting bodies on cross-cutting financial system issues. In the immediate term, the Committee is suspending consultation on all policy initiatives and postponing all outstanding jurisdictional assessments planned in 2020 under its Regulatory Consistency Assessment Programme.
In the coming days, the Committee will consider additional measures aimed at supporting the financial resilience of banks and the operational resilience of both the banking and supervisory community during these unprecedented times.