Date of Publication: September 1, 2020

Author: BlackRock

Summary:

The COVID-19 crisis has posed unprecedented challenges for global economies. While the public health and humanitarian crisis is ongoing, we can begin to draw select lessons from the March 2020 market turmoil. The outbreak of the pandemic resulted in a liquidity crisis that was different from the credit crisis experienced in the Global Financial Crisis (GFC). Market volatility increased sharply, and market liquidity deteriorated significantly, including in markets traditionally seen as liquid and low risk. As many countries moved into lockdown to contain the pandemic, issuers, banks and investors concentrated their actions on reducing their risk exposure and preserving their liquidity. The COVID-19 outbreak was an extreme stress event that demonstrated the effectiveness of the many improvements to financial market resilience made over the past decade and highlighted areas that require attention. This ViewPoint summarizes key takeaways from our series of ViewPoints on Lessons from COVID-19 and considers the implications of the COVID-19 crisis across capital markets. In this paper, we review the key market events in March and the official sector’s interventions. We set out the lessons we have drawn from COVID-19, identifying what worked and what we believe needs to be addressed, and we conclude with policy recommendations and areas for future consideration.

Link to Full Reading:

https://www.blackrock.com/corporate/literature/whitepaper/viewpoint-lessons-from-covid-overview-financial-stability-september-2020.pdf