COVID-19, Macroeconomic and Sustainability Shocks, Moral Hazard and Resolution of Systemic Banking Crises: Designing Appropriate Systems of Public Support

Abstract Banks have so far weathered well the financial turbulence caused by COVID-19 while at same time being central in economic and response. As crisis moves from its initial phase as a short-term liquidity shock, sector is facing increasing volumes of non-performing loans, raising spectre banking solvency crisis. In economies already burdened with low-quality assets, fallout intensifying existing problems legacy loans heightening risk These issues are now worsened impact inflation invasion Ukraine. Thus, addressing bad supporting proper functioning system, major challenge systemic repercussions for range economies. This paper identifies great paradox: since bank rescues 2008–9 Global Financial Crisis there has been disproportionate focus on liability side balance sheets through resolution measures such bail-in accumulation bail-inable debt. Post-crisis regimes overlooked solutions lying within asset sheets. analyses historical evidence to argue that concentrating liability-focused approach exclusion asset-side ill-conceived. An excessive inevitably renders interventions liability/equity ineffective or very least insufficient maintain system viability stability. Bank restructuring involving use management companies, protection schemes even capital injections can play critical role achieving an expeditious restoration systems’ health following macroeconomic, sustainability