Global banks were supposed to be bullet-proof after boosting capital ratios but the regulatory buffers were never stress-tested for such a shock. They risk becoming the “amplifier” of the downturn as rising bad loans force them to pull back, starving the real economy of credit.
Related Article
A cyclist wearing a protective face mask as a precaution against the coronavirus moves past the Rocky statue outfitted with mock surgical face mask at the Philadelphia Art Museum in Philadelphia, Tuesday, April 14, 2020. (AP Photo/Matt Rourke)
Coronavirus pandemic
As the day unfolded: Scott Morrison says COVID-19 restrictions could be lifted in four weeks, global cases surpass 2 million, Australian death toll stands at 63
Even if the worst is avoided and there is no secondary financial crisis, there will not be a swift return to normal. Mohamed El-Erian from Allianz said the rescue measures offer liquidity but cannot prevent the slow burn of defaults. Nor can they kick start the economy when companies refuse to invest because they have no idea what is going to happen.

via Delusional: Investors are underestimating the economic shock the world is facing