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Banks should continue tapping their capital and liquidity shock absorbers to cushion the effects of the economic disruption caused by the ongoing Covid-19 pandemic, the Basel Committee on Banking Supervision says.

The BIS’s oversight body, known as the Group of Central Bank Governors and Heads of Supervision (GHOS), endorsed a co-ordinated approach to mitigating the risks posed by the pandemic to the global banking system.

“As the Covid-19 crisis continues to unfold, the vulnerabilities and risks to the global banking system will evolve,” the BIS said.

In response, GHOS members called on the Basel Committee “to preserve a global level playing field and to avoid regulatory fragmentation.”

That approach includes ongoing monitoring of risks to the global banking system from Covid-19, sharing information, encouraging banks to use their capital and liquidity flexibility, and taking additional globally-coordinated measures, if needed.

“Today’s decisions by GHOS will help further reinforce the ability of banks to absorb shocks and maintain lending to creditworthy households and businesses during the pandemic by providing further certainty regarding the usability of the Basel III capital and liquidity buffers,” said Pablo Hernández de Cos, chairman of the Basel Committee and governor of the Bank of Spain, in a statement.

The BIS noted that the global banking system entered the Covid-19 crisis with ample capital and liquidity, thanks to the Basel III reforms that were implemented after the global financial crisis of 2008.

“The Basel III capital and liquidity buffers help banks to absorb shocks and keep lending to creditworthy households and businesses,” it said. “Using capital and liquidity resources in this way should take priority at present.”

Once the crisis is over, regulators will provide banks with time to rebuild their capital and liquidity buffers, the group also noted.

At the same time, the GHOS reiterated its expectation that the remaining Basel III reforms will be fully and consistently implemented on their existing deadlines.

“Doing so will help to lock in the benefits of these standards to ensure that banks can withstand future crises,” it said.

The group also said that future changes to the Basel III framework will be limited and will be based on the assessed efficacy of these reforms, incorporating lessons from the Covid-19 crisis.

Looking ahead, GHOS endorsed recommendations from the Basel Committee to focus its future agenda on emerging risks to the financial system, including the ongoing digitization of finance and climate-related financial risk.