COVID-19 Impairs Central Banks’ Ability to Offer Credit Intermediation

Like in other parts of the world, COVID-19 is causing unprecedented challenges for bank supervisors in the MEFMI region. The pandemic has impaired central banks’ ability to offer credit intermediation due to lower lending capacity and worsening asset quality. There is a risk that the rise in the non-performing loans will trigger widespread distress among banking institutions. These developments call for timely, targeted and properly designed regulatory and supervisory responses, within the confines of international standards, to safeguard the financial sector amid the crisis whose impact may be worse than the Global Financial Crisis.

While national policy measures around the world have largely focused, among others on;utilisation of the available capital and liquidity buffers supporting affected borrowers, promoting balance sheet transparency, and maintaining operational and business continuity of banks as well as payment systems, some MEFMI member countries may not be able to implement similar interventions owing to the limited policy buffers and less sophisticated supervisory frameworks.

As part of its efforts to assist member countries to respond timely and effectively to the COVID-19 pandemic, MEFMI hosted a webinar on COVID-19 and Bank Supervision on 10 June 2020. The objective of the webinar was to improve awareness of the challenges faced by bank supervisors as a result of the COVID-19 pandemic and highlight measures being implemented by central banks and bank supervisors to maintain soundness of the banking sector amid the crisis.

A key output form the webinar was advice to bank supervisors, who were encouraged to continue implementing global best practice and not to use the crisis as a reason to backtrack on progress made in implementing the Basel standards. The webinar also identified  the need for bank supervisors to embrace digital transformation. It  is expected that the knowledge shared during the webinar will inspire participants to implement appropriate strategies to contain the impact of the crisis in their respective jurisdictions.

A total of 18 officials from six (6) MEFMI member countries (i.e. Kenya, Malawi, Mozambique, Rwanda, Tanzania and Zimbabwe) participated in the webinar. The webinar was also joined by international consultants, officials from the MEFMI Secretariat and WAIFEM. The former Senior Advisor at Financial Stability Institute, Mr. Amarendra Mohan was the resource person  while Mr. Patrick Mutimba of the MEFMI Secretariat was the moderator.

Prepared by Noel Mahombera