The implications of this will be addressed in the Bank’s next Quarterly Bulletin due to be published on 3 July. The near-term liquidity challenges faced by households and businesses as a result of the COVID-19 shock are significant and depending on future developments could result in solvency issues emerging.
In the months ahead minimising the extent to which these liquidity issues are followed by solvency issues will be important. The banking system has a role to play, and it must do so in a sustainable way. Temporary payment breaks that have been introduced are partly offsetting the immediate liquidity shock households and businesses are facing, but a portion may ultimately require longer-term solutions.