On 14 November 2022, the Financial Stability Board (FSB) published ‘Financial policies in the wake of COVID-19: supporting equitable recovery and addressing effects from scarring in the financial sector’.

The final report considers exit strategies through the lens of financial stability and the capacity of the financial system to finance strong and equitable growth. Incorporating feedback from the FSB’s external outreach, the report discusses how the evolution of the pandemic, the Russian invasion of Ukraine and subsequent economic developments have affected the challenges financial authorities face, and how these relate to the COVID-19 related measures taken.

The final report considers specific policy challenges in relation to:

  • Ensuring the effectiveness of domestic policies.
  • Containing cross-border spill overs and preventing scarring by addressing debt overhang issues.
  • The role of international standards.

The report stresses that consideration about adjusting, amending and potentially exiting support measures should take these challenges into account, to support global economic recovery in the near term and prevent financial stability impacts and scarring effects to sustainable growth over the long term.

To this end, authorities should consider:

  • How to ensure the effectiveness of domestic policies to make good use of, and re-gain as appropriate, policy space.
  • How to contain cross-border spill overs.
  • How to address debt overhang issues and other potential vulnerabilities in the non-financial sectors that may create scarring effects on the growth in the longer run.