New evaluation report finds some indications of a positive relationship between banks’ capital headroom and lending and further evidence that temporary reductions in capital requirements supported lending during the Covid-19 pandemic. Report finds limited evidence that banks’ reluctance to use liquidity buffers has affected their lending and market activity, and little sign of procyclical effects on lending during the pandemic related to the introduction of the expected credit loss (ECL) framework. Basel Committee stresses the importance of the prudent build-up and use of buffers at banks to smooth the impact of internal and external shocks.

This information was gathered from the Bank for International Settlements