To sum up, our main messages coming from today’s FSR are three-fold: First, the overall risk environment remains very challenging and continues to be characterised by heightened uncertainty, closely linked to the path of – and response to – the virus and the structural implications of this crisis.
Second, the banking system as a whole has loss-absorbing capacity for shocks that are materially worse than current baseline projections. That loss-absorbing capacity is not, however, unlimited. Third, the macroprudential framework has helped ensure that the financial system is better able to absorb the shocks being faced currently.The experience of the current shock also offers lessons for the evolution of the framework over time.