Basel A Al-Haroon: Requirements and challenges of rebuilding the banking sector's capital and liquidity margins after lifting stimulus packages

Speech by His Excellency Mr Basel A Al-Haroon, Governor of the Central Bank of Kuwait, in the 46th Ordinary Session of the Council of the Governors of the Arab Central Banks and Monetary Authorities, Jeddah, 18 September 2022.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Two years ago today, the world was hit by coronavirus pandemic. Repercussions were far-reaching and severe posing challenges not only to the global markets but also the normal life that has been disrupted or almost disrupted. The pandemic had elements of both supply and demand shocks. On the supply side, closures in many economies around the world, and restrictions imposed on travel, gatherings, events and schools, as well as business interruptions led to supply chains disruption that had a negative impact on the growth of the global economy. This, in turn, affected the demand on energy that that witnessed a sharp fall, as brent crude oil plunged to 20-year low in April 2022 of USD 20 per barrel. The Purchasing Managers' Index (PMI), concurrently, experienced a sharp decline during the same period reflecting deterioration of the operating environment for companies.

In an effort to reduce the negative effects of the spread of the coronavirus pandemic and weather its repercussions and challenges, central banks around the worlds have taken exceptional measures. At the monetary policy level, interest rates have been cut to all-time low levels, reaching zero in some countries, liquidity injected exceptionally into the markets having eased the regulatory requirements to ensure the continued inflows, while fiscal policy stimulated economies by providing financial facilities and aids including payment moratoriums and extending financial aids to the affected segments.