efforts over the last four years to ensure that our framework did not hamper banks ’ ability to perform their critical function to lend to households and businesses and serve as financial intermediaries. when the covid event began last year, the magnitude of the economic and financial disruptions was staggering. voluntary and mandated quarantines, lockdowns, and social distancing efforts hammered aggregate demand, caused unfathomably large job losses clustered in certain service sectors, and sharply increased uncertainty. workplaces closed, travel was curtailed, and global supply chains were disrupted. large sectors of the global economy, such as tourism and transportation, came to an abrupt stop. as concerns about the virus and measures to contain it spread, these effects grew. at the same time, certain critical financial markets seized up or ceased to function effectively. short - term liquidity markets were strained as investors “ dashed for cash, ” focusing on their own liquidity. the commercial paper market, where companies raise cash by issuing short - term debt, seized up to an extent similar to the fall of 2008. and as in the financial crisis, investors in certain prime and tax - exempt money market funds with immediate cash needs submitted redemption 4 / 6 bis central bankers'speeches requests that resulted in significant outflows from these funds. equity prices plunged and yields on corporate bonds widened significantly. perhaps i can simply underscore the peril of the time by noting that the treasury market — the lifeblood of the financial system — became highly dysfunctional, something that didn ’ t even happen in 2008 or 2009. this was truly a massive global shock. as businesses closed and consumers stayed home, 22 million jobs were lost in scarcely two months. the unemployment rate soared from 3. 5 percent in february 2020 to 14. 8 percent in april 2020, well above the highest rates experienced in the united states since the great depression. 2 in addition to the immediate and apparent impact of the covid event, there was also tremendous uncertainty regarding the path of future government responses. macroeconomic experts, both at the federal reserve, and elsewhere, constructed many different plausible scenarios for how the economy would fare, and this was reflected in scenariowriting related to stress tests. our june 2020 stress tests included a sensitivity analysis, designed in april 2020, that used three alternative downside scenarios that spanned the wide range of projections made at that time by professional forecasters. those scenarios included peak unemployment rates ranging from 16 percent to 19. 5 percent and assumed

financial institutions were allowed to take on high levels of leverage. this leverage was facilitated by short - term wholesale borrowing, owing in part to market - based vehicles, such as money market mutual funds and asset - backed 2 / 10 bis central bankers'speeches commercial paper programs that allowed the rapid expansion of liquidity transformation outside of the regulated depository sector. finally, a self - reinforcing loop developed, in which all of the factors i have just cited intensified as investors sought ways to gain exposure to the rising prices of assets linked to housing and the financial sector. as a result, securitization and the development of complex derivatives products distributed risk across institutions in ways that were opaque and ultimately destabilizing. in response, policymakers around the world have put in place measures to limit a future buildup of similar vulnerabilities. the united states, through coordinated regulatory action and legislation, moved very rapidly to begin reforming our financial system, and the speed with which our banking system returned to health provides evidence of the effectiveness of that strategy. moreover, u. s. leadership of global efforts through bodies such as the basel committee on banking supervision, the financial stability board ( fsb ), and the group of twenty has contributed to the development of standards that promote financial stability around the world, thereby supporting global growth while protecting the u. s. financial system from adverse developments abroad. preeminent among these domestic and global efforts have been steps to increase the loss - absorbing capacity of banks, regulations to limit both maturity transformation in short - term funding markets and liquidity mismatches within banks, and new authorities to facilitate the resolution of large financial institutions and to subject systemically important firms to more stringent prudential regulation. several important reforms have increased the loss - absorbing capacity of global banks. first, the quantity and quality of capital required relative to risk - weighted assets have been increased substantially. 9 in addition, a simple leverage ratio provides a backstop, reflecting the lesson imparted by past crises that risk weights are imperfect and a minimum amount of equity capital should fund a firm ’ s total assets. moreover, both the risk - weighted and simple leverage requirements are higher for the largest, most systemic firms, which lowers the risk of distress at such firms and encourages them to limit activities that could threaten financial stability. 10 finally, the largest u. s. banks participate in the annual comprehensive capital analysis and review ( ccar ) the stress tests. in addition to contributing to