The pandemic crisis, which broke out in early 2020, is still affecting human lives and economic activity around the globe, causing unprecedented transformations which were not foreseen just before its onset. The European Union, its citizens and the financial and non-financial firms active therein have also been negatively affected (albeit to a varying degree).Nevertheless, unlike in the two previous, most recent economic crises, namely the 2007-2009 Global Financial Crisis (GFC) and the 2010-2018 sovereign debt crisis in the Eurozone, the impact on the stability of the EU financial system has been comparatively mild so far. This is due to several reasons: most importantly, the root-cause of the pandemic was not attributed to any sector of the financial system but originated in the real economy. Further, the financial regulatory framework had become much more robust in the meantime (albeit also much more complicated to comply with), credit institutions in particular are better capitalised now than in 2008, with (almost across the board) lower ratios of non-performing loans (NPLs) and significantly stronger liquidity, while financial supervision has also been enhanced and the macro-prudential financial framework adopted in the wake of the GFC was fully activated. Finally, many EU Member States and the EU itself acted decisively, and proactively pumped billions of Euros of support programmes into the real economy to prevent an economic meltdown.During the last 15 months, national and EU institutions and agencies have orchestrated their efforts towards establishing an appropriate framework in order to primarily support those parts of the population and of the businesses most severely affected by the pandemic and to contain its negative effects. This included a combination of fiscal policy, monetary policy and financial policy measures; new instruments and rescue funds were introduced, flexibility in the application of several existing rules has been applied to the extent necessary and feasible, and some ‘quick-fix’ legislative actions supplemented the pandemic crisis management toolbox.When we published the first edition of this EBI e-book in May 2020 (‘Pandemic Crisis and Financial Stability’, https://ssrn.com/abstract=3607930), the world seemed to be on the brink of collapse. Reflecting the positive developments over the past year, this second edition supports a more optimistic approach on the further evolution of the pandemic. Entitled ‘Financial stability amidst the pandemic crisis: On top of the wave’, the key assumption is that the various infection waves of the crisis will not be followed by another severe one, as are we gradually reaching a much-desired point of ‘new normality’. And yet, we are ‘on top of the wave’ of the crisis as a whole, as our book title suggests. Therefore, challenges in relation to financial stability should not be underestimated, especially in (but not limited to) the field of NPLs, a new wave of which is emerging due to the impact of the pandemic on the businesses and households mostly affected. Furthermore, accommodating monetary policy measures, conventional and unconventional, fiscal stimuli and temporary financial measures will be lifted as well, meaning that several safety-net components embedded during the pandemic in the institutional and regulatory framework will cease to support economic (including financial) activity in the steady state. In addition, the discussion on the challenges linked inter alia to climate change is in the current constellation more focused than ever before and the adoption of measures to mitigate the related risks is high on policymakers’ and financial supervisors’ agendas. We sincerely hope that this volume will contribute to this debate and may serve as a platform for dialogue to reflect on the right way forward.This publication contains 17 articles, structured in 5 sections, and discussing all of the above considerations. We are grateful to all authors, most of them members of the Academic Board of the European Banking Institute, who participated in this academic work with their valuable contributions. They develop on various regulatory aspects arising from the prolonged pandemic and related to various aspects of financial stability, at a moment when the (potentially treacherous) perception is that we are close to returning to a new normal. The contributors also discuss the long-term implications for banking and financial markets, and/or arrangements for transitioning back to post-pandemic times. Contents:SECTION I: GENERAL OVERVIEW1. The silver lining of COVID: the end of secular stagnation (Charles Wyplosz)2. When and how to unwind COVID-support measures to the banking system? (Rainer Haselmann & Tobias Tröger)3. Lessons from the pandemic for European finance: a twin transformation towards green technology (Wolf-Georg Ringe)4. EU financial regulation in times of instability (Danny Busch)SECTION II: NON-PERFORMING LOANS5. Non-performing loans: new risks and policies (Emilios Avgouleas, Rim Ayadi, Marco Bodellini, Giovanni Ferri, Barbara Casu & Willem Peter de Groen)6. Banking supervision in times of uncertainty: the case of NPLs (Concetta Brescia Morra)7. Non-performing loans in the pandemic crisis and the Directive on preventive corporate restructuring (Juana Pulgar Ezquerra & Ignacio Signes de Mesa)SECTION III: THE ROLE OF THE ECB8. The ECB’s response to the COVID-19 crisis and its role in the green recovery (Seraina Grünewald)9. The implementation of the single monetary policy since the outbreak of the pandemic crisis and some considerations on its impact on financial stability (Christos Gortsos)10. Next Generation EU: its meaning, challenges, and link to sustainability (Carlos Bosque, David Ramos Muñoz, & Marco Lamandini)SECTION IV: BANKING REGULATION 35711. Releasability Combined Buffer Requirements after the COVID-19 pandemic (Bart Joosen)12. Restriction for bank capital remuneration in the Pandemic: A Lesson for the Future or an Outright Extraordinary Measure? (Antonella Sciarrone Alibrandi & Claudio Frigeni)13. Cultural reforms in Irish banks – A pandemic report card (Blanaid Clarke)14. Mothballing the economy and the effects on banks (Matthias Lehmann)15. A post-COVID reformed EU: new fiscal policies preserving financial stability and the future of the banking sector (Luis Morais)SECTION V: CAPITAL MARKETS REGULATION16. Emergency measures for equity trading: the case against short selling bans and stock exchange shutdowns (Luca Enriques & Marco Pagano)17. Fixing the core of EU capital markets legislation during the pandemic: temporary exercises or long-term path? (Filippo Annunziata & Michele Siri)
