Releasing bank buffers to cushion the crisis - a quantitative assessment

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 buffers would decline to US$ 800 billion, which could support US$ 5 trillion of additional loans (6% of total loans outstanding). Yet in a severely adverse scenario, similar to the Great Financial Crisis, the corresponding figures would be only US$ 270 billion and US$ 1 trillion (1.3% of total loans).