Yale School of Management

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Countries Ease Bank Capital Buffers

April 16, 2020

Countries around the world are easing bank capital requirements to help banks absorb losses and to allow them to maintain the flow of credit during the COVID-19 crisis. 

Most of these measures involve the Basel III capital standards that global regulators agreed to implement after the 2007-09 financial crisis. Thanks to Basel III and like measures, banks across the world have substantially more capital than they had heading into that crisis. However, the current crisis threatens to quickly eat into those capital cushions. Banks are already reporting substantial credit losses and growing balance sheets, as they meet existing commitments and extend new loans. Easing capital standards today is a form of macroprudential policy, because regulators’ focus is on maintaining the health of the financial system as a whole. 

Continue reading “Countries Ease Bank Capital Buffers”

Residential Mortgage and Rent Relief During Crises

April 16, 2020

Cash flows around the world have dropped dramatically as more governments require non-essential businesses to close and  individuals to stay at home in order to fight the COVID-19 pandemic. In a fairly short time, such actions have led to massive layoffs and job losses. In the United States, for example, the country has swung from historically low unemployment levels to historically high numbers of claims for unemployment benefits; similar effects can be observed in other countries.  As a consequence, individuals are experiencing, and are expected to continue to experience for some time, difficulty in paying their housing costs. Whether mortgage or rent, housing is usually the largest fixed cost for households and many governments have responded by announcing various packages to provide relief. This post begins by examining the fundamental challenge presented by the need to provide residential expense relief on a grand scale. It then details multiple programmatic interventions utilized in crises past and present. Finally, this post provides some key takeaways to consider when implementing residential expense relief policies.

Continue reading “Residential Mortgage and Rent Relief During Crises”

Germany Launches New Support Program After Partial Guarantee Insufficient to Promote Lending to Small Businesses

April 15, 2020

On April 6, Germany introduced a fully guaranteed loan program to support small businesses after an earlier partial government guarantee did not achieve its intended results. The Quick Loan Program will provide fully-guaranteed “instant” loans of up to EUR 800,000 to eligible businesses.

Continue reading “Germany Launches New Support Program After Partial Guarantee Insufficient to Promote Lending to Small Businesses”

Countries Ease Bank Capital Buffers

April 16, 2020

Countries around the world are easing bank capital requirements to help banks absorb losses and to allow them to maintain the flow of credit during the COVID-19 crisis. 

Most of these measures involve the Basel III capital standards that global regulators agreed to implement after the 2007-09 financial crisis. Thanks to Basel III and like measures, banks across the world have substantially more capital than they had heading into that crisis. However, the current crisis threatens to quickly eat into those capital cushions. Banks are already reporting substantial credit losses and growing balance sheets, as they meet existing commitments and extend new loans. Easing capital standards today is a form of macroprudential policy, because regulators’ focus is on maintaining the health of the financial system as a whole. 

Continue reading “Countries Ease Bank Capital Buffers”

Residential Mortgage and Rent Relief During Crises

April 16, 2020

Cash flows around the world have dropped dramatically as more governments require non-essential businesses to close and  individuals to stay at home in order to fight the COVID-19 pandemic. In a fairly short time, such actions have led to massive layoffs and job losses. In the United States, for example, the country has swung from historically low unemployment levels to historically high numbers of claims for unemployment benefits; similar effects can be observed in other countries.  As a consequence, individuals are experiencing, and are expected to continue to experience for some time, difficulty in paying their housing costs. Whether mortgage or rent, housing is usually the largest fixed cost for households and many governments have responded by announcing various packages to provide relief. This post begins by examining the fundamental challenge presented by the need to provide residential expense relief on a grand scale. It then details multiple programmatic interventions utilized in crises past and present. Finally, this post provides some key takeaways to consider when implementing residential expense relief policies.

Continue reading “Residential Mortgage and Rent Relief During Crises”

Germany Launches New Support Program After Partial Guarantee Insufficient to Promote Lending to Small Businesses

April 15, 2020

On April 6, Germany introduced a fully guaranteed loan program to support small businesses after an earlier partial government guarantee did not achieve its intended results. The Quick Loan Program will provide fully-guaranteed “instant” loans of up to EUR 800,000 to eligible businesses.

Continue reading “Germany Launches New Support Program After Partial Guarantee Insufficient to Promote Lending to Small Businesses”