What lessons can be drawn from past banking sector crises? How can these insights be contrasted and contextualised amidst our current circumstances? What can be done to better prepare for future scenarios?
On 4 August 2020, a webinar themed “Navigating COVID-19: Fortifying Resilience in the Banking Sector” sought some answers to these challenging questions. This webinar was jointly organised by PIDM, The South East Asian Central Banks (SEACEN) Research and Training Centre, and Deloitte. More than 500 participants joined the webinar, including regulators, bankers and professionals from the financial services sector across Asia Pacific, as well as multilateral institutions.
The Executive Director of SEACEN set the broad context by framing COVID-19 as a global crisis of a lifetime. What had started as a public health crisis was bringing with it worrying consequences on employment, social and economic fronts (households and corporates), as well as the financial sector. The next 2 speakers - Andrew Gracie and Yvonne Chia - shared lessons learnt from previous crises presenting perspectives on the future with a regulator’s and banker’s lens.
The final segment of the webinar was a panel discussion, moderated by SEACEN, on leadership in crisis and practical actions in the future. The CEOs of PIDM and the Indonesia Deposit Insurance Corporation, as well as representatives from the Asian Development Bank and Deloitte, recognised the likelihood of a protracted crisis. There were useful exchanges of views among regulators and banking practitioners on various topics including policy trade-offs, the potential implications of ongoing preventive measures, bank resolution powers, resources and tools, improved diagnostics of system-wide stress, and policies and strategies to resolve non-performing loans of banks.
Key takeaways are that the post-GFC reforms have indeed resulted in higher capital and liquidity buffers to support financial systems in distress. Notwithstanding this, areas that today warranted closer attention included the timing of regulatory interventions, and monitoring vulnerabilities by using robust diagnostics undertaken through continuous asset quality reviews and stress testing. From a policy perspective, it is important to have in mind a strategic policy framework to apply the post-GFC regulatory tools as designed, and to craft robust contingency plans to navigate possible scenarios and prevailing uncertainties. For banks considering mergers and acquisitions, possible opportunities in a crisis was also noted. The challenge was to find the right time to transact and to work with regulators towards solutions that would ultimately strengthen the resilience of the banking system.
From top left: Mr Andrew Gracie (Former Executive Director for Resolution at the Bank of England and ex-chairman of the Financial Stability Board’s Working Group on Resolution), Mr. Aziz Durrani (Senior Financial Sector Specialist, The SEACEN Centre), Mr. Tim Pagett (Financial Services Industry Leader, Deloitte Asia Pacific), Dr. Cyn-Young Park (Director, Economic Research and Regional Cooperation Department, Asia Development Bank), Ms. Yvonne Chia (Independent Non-executive Chairman of Standard Chartered Bank Malaysia), Dr. Mangal Goswami (Executive Director, The SEACEN Centre), Mr Rafiz Azuan Abdullah (Chief Executive Officer, PIDM), Mr. Chi-Nang Kong (Asia Head of PLAS, Deloitte) and Dr. Lana Soelistianingsih (Chief Executive Officer, Indonesia Deposit Insurance Corporation).