March 2021: New VoxEU Column – Unwinding COVID support measures for banks

By Thorsten Beck, Elena Carletti, and Brunella Bruno

The combined effect of the measures implemented to maintain banks’ ability to provide funds during the Covid crisis was to create a virtuous circle between corporates, banks, and sovereigns, avoiding a funding crunch for either and keeping risk premiums at deflated levels. However, it also created the basis for possible increased systemic risk in the future. This column argues that the exit strategy from the various support measures must be carefully designed and coordinated, as well as communicated in a clear and timely manner.

Unwinding COVID support measures for banks