Enrico Perotti tells Tim Phillips that while regulatory reform means that banks are unlikely to be at risk, the coronavirus shock poses a serious liquidity risk for the shadow banking sector, where significant funding has been extended on the basis of cash flow rather than real collateral. Avoiding financial panic is key, and will require liquidity support as well as targeted fiscal measures.
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Enrico Perotti tells Tim Phillips that while regulatory reform means that banks are unlikely to be at risk, the coronavirus shock poses a serious liquidity risk for the shadow banking sector, where significant funding has been extended on the basis of cash flow rather than real collateral. Avoiding financial panic is key, and will require liquidity support as well as targeted fiscal measures.