alessandra perrazzelli : the post covid - 19 banking system keynote speech by ms alessandra perrazzelli, deputy governor of the bank of italy, at the arab monetary fund - basel committee on banking supervision - financial stability institute ( amfbcbs - fsi ) high - level virtual session, abu dhabi, 8 - 9 december 2021. * * * introductory remarks it is a pleasure to join this seminar on the post covid - 19 banking system. i truly believe that the cooperation at international level among authorities is key to achieve a global coordination of the supervisory agenda. in my speech, i will focus on three main aspects : lessons learned from the pandemic ; ssm supervisory priorities in the medium term ; crisis management framework. 1. lessons learned from covid - 19 in the first 20 months after the pandemic outbreak, the banking system proved very resilient and able to support the economy. the lending activity in the euro area even increased in 2020, despite a sharp decrease of annual gdp over the same period ; at the same time, bank capital position and asset quality remained robust. the resilience of the banking sector has also been confirmed by the outcome of the recent eu - wide stress test that, together with other elements, is considered in the annual review process ( i. e. srep ). this has been the result, in my opinion, of three main factors, that proved to work very well. firstly, the government support measures. as we know, the governments immediately intervened to dampen the adverse effects of lockdowns, by allowing banks to continue to support lending, mainly via moratoria and public guarantees. secondly, the level of cooperation among european authorities and central banks. on the supervisory side, the ssm took a number of measures to grant temporary relief to banks, by allowing them flexibility to make use of capital and liquidity buffers. we also asked banks to refrain from distributing dividends, via a recommendation withdrawn only last october ; in addition, national macro - prudential authorities released or reduced capital buffers, while the european legislators issued a covid - 19 banking package to facilitate bank lending. the level of cooperation has been massive and key for the success of the measures. thirdly, basel iii regulatory reforms and supervisory action. the banking sector entered the pandemic in a much better shape than in the past ( greater capital buffers, reduced burden of legacy stocks of non - performing

depositor protection, also considering the lower customer fidelity for the so distributed products ; this kind of deposits tends to be volatile and may rapidly decrease when the institution is perceived as weak. these conditions increase the need of a prompt intervention by supervision and resolution authorities as soon as the weaknesses of the bank appear as well as further analysis on the possible implication for crisis management regulation. in conclusion, identifying an adequate framework for managing the crisis of small and medium sized banks as well as for banks with innovative business model is crucial and particularly urgent at present time, also considering that this kind of bank could be those suffering the most from the pandemic. 4. conclusions the pandemic confirms and reinforces the perception of some ‘ traditional ’ risks and structural inefficiencies in the banking and financial sector. at the same time, the widespread use of digital solutions emphasizes the need to strengthen the supervisory approach and to review the regulatory framework to take into account the swift changes in the financial environment, also from a crisis management angle - point. cooperation is crucial to tackle the challenges ahead. 3 / 4 bis central bankers'speeches 4 / 4 bis central bankers'speeches