The essential role of the banking sector in the provision of liquidity and financing

Santiago Carbó, Professor of Economics at CUNEF and Director of Financial Studies at Funcas, highlights the central role that the financial sector is playing in the essential provision of liquidity and financing to citizens and companies to overcome the covid-19 economic crisis.

• The article reviews the measures taken so far to deal with the crisis at different countries and institutions: “Although there are differences in the actions approved among countries (subsidies, direct aid, moratoriums, public guarantees), they share the common denominator of the importance of banks in financing and payment systems”.
• However, many of these measures shift much of the responsibility to banks. Specifically, the author refers to measures as the moratorium on loan repayments, state guarantee loans, and direct capital injections in companies. In all of them “the financial muscle, the know-how and the capabilities and expertise in risk analysis of the banking sector will be key”.
• Santiago Carbó highlights that to face these challenges many entities have prudently recognized provisions in their first quarter results: "With this recognition, you can face the financing challenge from a more realistic perspective".