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International Settlement

The Bank for International Settlements (BIS) is an international company limited by shares owned by central banks which "fosters international monetary and financial cooperation and serves as a bank for central banks". The BIS carries out its work through subcommittees, the secretariats it hosts and through an annual general meeting of all member banks. It also provides banking services, but only to central banks and other international organizations. It is based in Basel, Switzerland, with representative offices in Hong Kong and Mexico City.

Articles by International Settlement

Payment holidays in the age of Covid: implications for loan valuations, market trust and financial stability

15 hours ago

FSI Briefs
 | 
No 8
 | 
28 May 2020

by 
Rodrigo Coelho and
Raihan Zamil

PDF full text (307kb)
 | 
10 pages

Highlights
Governments and banks have introduced payment deferral programmes to support borrowers affected by Covid-19. But deferred payments are not forgiven and must be repaid in the future, raising prospective risks to the banking system. Thus, they should be designed to balance near-term economic relief benefits with longer-term financial stability considerations.
The Basel Committee on Banking Supervision (BCBS) and several prudential

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Model risk at central counterparties: Is skin-in-the-game a game changer?

4 days ago

BIS Working Papers
 | 
No 866
 | 
25 May 2020

by 
Wenqian Huang and
Előd Takáts

PDF full text (241kb)
 | 
28 pages

Focus
We investigate how central counterparties (CCPs) manage counterparty credit risks. CCPs play a key role in clearing derivative trades. They stand between clearing members, insuring them against counterparty credit risks. To manage these risks, CCPs ask their clearing members for collateral, ie initial margin. Model risk arises when a CCP underestimates potential credit losses in its initial margin model. If model risk were to

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Dealing with Covid-19: understanding the policy choices

7 days ago

BIS Bulletin
 | 
No 19
 | 
22 May 2020

by 

Frederic Boissay,

Daniel Rees and

Phurichai Rungcharoenkitkul

PDF full text (744kb)
 | 
9 pages

Key takeaways
Containment policies save lives but restrict economic activity. Standard approaches to accounting for the value of human lives lend support to these policies despite their high short-term economic costs.

Integrated epidemic-macroeconomic models provide a coherent framework for quantifying the costs and benefits of containment policies. Part of the benefit comes from limiting

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EME bond portfolio flows and long-term interest rates during the Covid-19 pandemic

9 days ago

BIS Bulletin
 | 
No 18
 | 
20 May 2020

by 

Peter Hördahl and

Ilhyock Shim

PDF full text (808kb)
 | 
9 pages

Key takeaways
Bond portfolio outflows from emerging market economies (EMEs) are typically associated with currency depreciation and rising domestic long-term interest rates. This relationship asserted itself in a particularly stark way during the Covid-19 crisis in mid-March 2020.
The relationship between bond portfolio outflows and long-term rates varies across EMEs, depending on factors such as bond market depth, FX market functioning and

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The drivers of cyber risk

9 days ago

BIS Working Papers
 | 
No 865
 | 
20 May 2020

by 

Iñaki Aldasoro,

Leonardo Gambacorta,

Paolo Giudici and

Thomas Leach

PDF full text (684kb)
 | 
45 pages

Focus
Information technology (IT) has become indispensable, underpinning economic growth over the past decades. As organisations of all sizes in both the public and private sector become ever more interconnected and reliant on IT products and services such as cloud-based systems and artificial intelligence, they are increasingly exposed to cyber risks – the risk of financial loss,

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On health and privacy: technology to combat the pandemic

10 days ago

BIS Bulletin
 | 
No 17
 | 
19 May 2020

by 

Carlos Cantú,

Gong Cheng,

Sebastian Doerr,

Jon Frost and

Leonardo Gambacorta

PDF full text (1,164kb)
 | 
9 pages

Key takeaways
Technology has been harnessed in the fight against the Covid-19 pandemic, eg to administer remote medical consultations, analyse aggregate movements and track paths of contact.
Successful applications are predicated on broad public support. They must address concerns about data privacy, and the potential for misuse of data by governments and companies.

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Covid-19 and regional employment in Europe

14 days ago

BIS Bulletin
 | 
No 16
 | 
15 May 2020

by 

Sebastian Doerr and

Leonardo Gambacorta

PDF full text (1,782kb)
 | 
9 pages

Key takeaways

We construct employment risk indices for European regions that reflect the share of jobs under threat

from Covid-19. The risk index is based on local employment in sectors that are more exposed to the

pandemic and on the regional incidence of small firms.

Employment in regions in southern Europe and France is shown to have high risk indices, while regions

in

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Financial crime in times of Covid-19 – AML and cyber resilience measures

14 days ago

FSI Briefs
 | 
No 7
 | 
14 May 2020

by 

Juan Carlos Crisanto and

Jermy Prenio

PDF full text (330kb)
 | 
12 pages

Highlights

Criminals are exploiting vulnerabilities opened up by the Covid-19 lockdown, increasing the risks of cyber attacks, money laundering (ML) and terrorist financing (TF).

Authorities worldwide have responded by drawing financial institutions’ attention to these threats and by providing guidance on ways to improve cyber security and mitigate ML and TF risks.

Financial authorities are warning

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US dollar funding markets during the Covid-19 crisis – the international dimension

17 days ago

BIS Bulletin
 | 
No 15
 | 
12 May 2020

by 

Egemen Eren,

Andreas Schrimpf and

Vladyslav Sushko

PDF full text (663kb)
 | 
9 pages

Key takeaways
Dislocations in domestic US dollar money markets reverberated globally. Non-US banks lost a substantial part of funding from money market funds and had to borrow at shorter maturities.
Nevertheless, the severity of dollar funding strains varied substantially across banks, and eased for banks from jurisdictions with standing swap lines with the Federal Reserve.
The impact of policy measures to quell

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US dollar funding markets during the Covid-19 crisis – the money market fund turmoil

17 days ago

BIS Bulletin
 | 
No 14
 | 
12 May 2020

by 

Egemen Eren,

Andreas Schrimpf and

Vladyslav Sushko

PDF full text (682kb)
 | 
9 pages

Key takeaways
Short-term dollar funding markets experienced severe dislocations in mid-March 2020, with funding diverted from unsecured funding markets as investors withdrew and switched to secured funding markets and government MMFs.
Outflows from US prime MMFs led to a loss of funding for banks and a significant shortening of funding maturities; this precipitated spikes in indicators of bank funding costs, such

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The CCP-bank nexus in the time of Covid-19

18 days ago

BIS Bulletin
 | 
No 13
 | 
11 May 2020

by 

Wenqian Huang and

Előd Takáts

PDF full text (669kb)
 | 
9 pages

Key takeaways
During the Covid-19-induced financial turbulence, central counterparties (CCPs) issued large margin calls, weighing on the liquidity of clearing member banks.
In spite of the turbulence, CCPs remained resilient, as intended by the post-crisis reforms of financial market infrastructures.
Higher margins should be expected during heightened turbulence, but the extent of the procyclicality of margining is the consequence of

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Global and domestic financial cycles: variations on a theme

18 days ago

BIS Working Papers
 | 
No 864
 | 
11 May 2020

by 

Iñaki Aldasoro,

Stefan Avdjiev,

Claudio Borio and

Piti Disyatat

PDF full text (414kb)
 | 
32 pages

Focus
Interest in financial cycles has increased sharply in recent years. This paper contrasts and compares analytically and empirically two popular notions: the "domestic financial cycle" (DFC) and the "global financial cycle" (GFCy).
Contribution
Despite their popularity, there is considerable ambiguity about the two financial cycle notions. As a result, they are sometimes confused.

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Pension contributions and tax-based incentives: evidence from the TCJA

21 days ago

BIS Working Papers
 | 
No 863
 | 
08 May 2020

by 

Ahmed Ahmed and

Anna Zabai

PDF full text (384kb)
 | 
38 pages

Focus
This paper uses the Tax Cuts & Jobs Act of 2017 (TCJA) as a natural experiment to show that sponsor contributions to corporate defined benefit pension funds respond to tax-based incentives. Pension plan sponsors can deduct pension expenses from corporate tax returns. The TCJA cut the US federal corporate tax rate from 35% to 21%. In turn, this cut resulted in a temporary tax break on pension contributions. As a result, sponsors had

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On the instability of banking and other financial intermediation

21 days ago

BIS Working Papers
 | 
No 862
 | 
08 May 2020

by 

Chao Gu,

Cyril Monnet,

Ed Nosal and

Randall Wright

PDF full text (658kb)
 | 
51 pages

Focus
Are banks, or financial intermediaries more generally, inherently unstable and prone to volatility? Historically, even some of the staunchest proponents of laissez-faire such as Milton Friedman have viewed banking as inherently unstable and hence requiring government intervention.
Contribution
In this paper, we investigate the logical possibility that financial intermediation might be

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Effects of Covid-19 on the banking sector: the market’s assessment

21 days ago

BIS Bulletin
 | 
No 12
 | 
07 May 2020

by 

Iñaki Aldasoro,

Ingo Fender,

Bryan Hardy and

Nikola Tarashev

PDF full text (702kb)
 | 
9 pages

Key takeaways
Banks’ performance on equity and debt markets since the Covid-19 outbreak has been on a par with that experienced after the collapse of Lehman Brothers in 2008.
During the initial phase, the market sell-off swept over all banks, which underperformed significantly relative to other sectors. Still, markets showed some differentiation by bank nationality, and credit default swap (CDS)

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Banks’ dividends in Covid-19 times

23 days ago

FSI Briefs
 | 
No 6
 | 
06 May 2020

by 

Jean-Philippe Svoronos and

Rastko Vrbaski

PDF full text (274kb)
 | 
10 pages

Highlights
Regulatory actions in the current circumstances need to focus on preserving banks’ lending activity without jeopardising their solvency. This means that flexibility in capital requirements, including through the use of regulatory buffers, and capital conservation should go hand in hand.
Basel III provides for automatic distribution constraints when capital falls below specific thresholds. In the current context, this may

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Releasing bank buffers to cushion the crisis – a quantitative assessment

23 days ago

BIS Bulletin
 | 
No 11
 | 
05 May 2020

by 

Ulf Lewrick,

Christian Schmieder,

Jhuvesh Sobrun and

Előd Takáts

PDF full text (672kb)
 | 
9 pages

Key takeaways
Banks globally entered the Covid-19 crisis with roughly US$ 5 trillion of capital above their Pillar 1 regulatory requirements. 
The amount of additional lending will depend on how hard banks’ capital is hit by the crisis, on their willingness to use the buffers and on other policy support. 
In an adverse stress scenario such as the savings and loan crisis, banks’ usable

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Dealers’ insurance, market structure, and liquidity

24 days ago

BIS Working Papers
 | 
No 861
 | 
04 May 2020

by 

Francesca Carapella and

Cyril Monnet

PDF full text (3,871kb)
 | 
78 pages

Focus
Many financial markets operate through dealers, market-makers, or similar intermediaries that promote liquidity in over-the-counter (OTC) markets. Following the Great Financial Crisis of 2007-09, clearing of standard derivatives contracts through a central counterparty (CCP) became mandatory. Through novation, CCP clearing reduces counterparty risk and reinforces market liquidity and stability. However, the effects of

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Climate-related financial risks: a survey on current initiatives

28 days ago

Summary of document history  

Previous version
Previousconsultation
This version
Subsequentconsultation
Subsequentversion

This version

BCBS
 | 

Other

 | 
30 April 2020

PDF full text (487kb)
 | 
14 pages

Topics:
Macroprudential / systemic importance,
Market risk,
Liquidity risk,
Credit risk

This report summarises the main results of a stocktake conducted by the Basel Committee of its members’ initiatives on climate-related financial risks.
The survey suggests that:
the majority of Basel

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Public guarantees for bank lending in response to the Covid-19 pandemic

April 29, 2020

FSI Briefs
 | 
No 5
 | 
29 April 2020

by 

Patrizia Baudino

PDF full text (280kb)
 | 
9 pages

Highlights

In response to the Covid-19 pandemic, governments have launched guarantee programmes to support bank lending to companies, especially small and medium-sized enterprises. This is essential to avoid a sharp contraction in bank credit that would exacerbate the pandemic’s adverse impact. 

The design of such programmes needs to strike a difficult balance between responding promptly to the pandemic and maintaining a sufficient level of

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Covid-19 and corporate sector liquidity

April 28, 2020

BIS Bulletin
 | 
No 10
 | 
28 April 2020

by 

Ryan Niladri Banerjee,

Anamaria Illes,

Enisse Kharroubi and

José María Serena Garralda

PDF full text (1,292kb)
 | 
9 pages

Key takeaways
The Covid-19 shock is placing enormous strains on corporates cash buffers. Corporate financial statements from 2019 suggest that 50% of firms do not have sufficient cash to cover total debt servicing costs over the coming year.
Credit lines could provide firms with additional liquidity. On average undrawn credit stood around 120% of debt servicing costs

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Dollar invoicing, global value chains, and the business cycle dynamics of international trade

April 28, 2020

BIS Working Papers
 | 
No 860
 | 
28 April 2020

by 

David Cook and

Nikhil Patel

PDF full text (1,592kb)
 | 
61 pages

Focus
This paper studies how US dollar invoicing and the rise of global value chains (GVCs) affects the relationship between monetary policy, exchange rates and international trade.
Contribution
We build a three-country dynamic stochastic general equilibrium (DSGE) model where two small open economies trade with each other as well as with a large global economy (representing the United States). All the economies export final goods

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Buffering Covid-19 losses – the role of prudential policy

April 24, 2020

BIS Bulletin
 | 
No 9
 | 
24 April 2020

by 

Mathias Drehmann,

Marc Farag,

Nikola Tarashev and

Kostas Tsatsaronis

PDF full text (658kb)
 | 
9 pages

Key takeaways
By allowing banks to run down some of their buffers, policymakers are sending a strong signal about their resolve to lessen the economic fallout from the pandemic. Such prudential measures complement the main policy levers: monetary and fiscal instruments. 
To avoid a reduction in credit to the real economy, authorities need to ensure that banks have the capacity and

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Post-crisis international financial regulatory reforms: a primer

April 23, 2020

BIS Working Papers
 | 
No 859
 | 
23 April 2020

by 

Claudio Borio,

Marc Farag and

Nikola Tarashev

PDF full text (672kb)
 | 
69 pages

Focus
We review the bank and CCP international regulatory reforms implemented after the Great Financial Crisis (GFC). The reforms have sought to bolster financial stability through both improved and new standards.
Contribution
We ground the review on a unified analytical framework. The key notion is "shock-absorbing capacity". The framework allows us to discuss both individual "trees" (standards) and how they

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Insurance regulatory measures in response to Covid-19

April 23, 2020

FSI Briefs
 | 
No 4
 | 
23 April 2020

by 

Jeffery Yong

PDF full text (258kb)
 | 
9 pages

Highlights

Currently, insurers are more likely to experience losses from financial market volatility than from higher insurance claims arising from Covid-19. Few insurance supervisors have seen a need to strengthen or adjust prudential requirements to insulate insurers from current financial market uncertainties.

So far, authorities have responded mainly by taking measures to provide operational relief to insurers from regulatory and supervisory

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Identifying regions at risk with Google Trends: the impact of Covid-19 on US labour markets

April 21, 2020

BIS Bulletin
 | 
No 8
 | 
21 April 2020

by 

Sebastian Doerr and

Leonardo Gambacorta

PDF full text (861kb)
 | 
8 pages

Key takeaways
Information on local labour markets and Google searches can be used to construct a measure of the vulnerability of employment in different regions of the United States to the Covid-19 shock. 
Regional exposure to Covid-19 varies significantly, ranging from a low of 2% to a high of 98% of total local employment.
We test for the usefulness of the Covid-19 exposure measure by showing that areas with higher

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Expected loss provisioning under a global pandemic

April 20, 2020

FSI Briefs
 | 
No 3
 | 
20 April 2020

by 

Raihan Zamil

PDF full text (265kb)
 | 
9 pages

Highlights

In response to the 2007-09 Great Financial Crisis (GFC), accounting standard setters introduced a new methodology to value loans based on expected credit losses (ECL). The previous approach, based on incurred losses, was viewed as procyclical and inconsistent with prudential objectives.

In the wake of the Covid-19 pandemic, several prudential authorities and the Basel Committee on Banking Supervision (BCBS), introduced a series of

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The Janus face of bank geographic complexity

April 20, 2020

BIS Working Papers
 | 
No 858
 | 
20 April 2020

by 

Iñaki Aldasoro,

Bryan Hardy and

Maximilian Jager

PDF full text (1,284kb)
 | 
56 pages

Focus
This paper studies the relationship between bank geographic complexity and risk. We use a unique dataset of 96 bank holding companies around the world to measure the geographic dispersion of their affiliates. We study how this dispersion interacts with economic and regulatory conditions to affect the riskiness of the bank.
Contribution
Global banks’ complexity is a major concern for policy makers,

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Macroeconomic effects of Covid-19: an early review

April 17, 2020

BIS Bulletin
 | 
No 7
 | 
17 April 2020

by 

Frederic Boissay and

Phurichai Rungcharoenkitkul

PDF full text (677kb)
 | 
9 pages

Key takeaways
Past epidemics had long-lasting effects on economies through illness and the loss of lives, while Covid-19 is marked by widespread containment measures and relatively lower fatalities among young people.
The short-term costs of Covid-19 will probably dwarf those of past epidemics, due to the unprecedented and synchronised global sudden stop in economic activity induced by containment measures.
The current

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