Biggest Crisis Test Is Still to Come With Insolvencies, BIS Says

Policy makers are facing the most economically challenging part of the Covid-19 crisis in avoiding the creation of “zombie” companies, according to the Bank for International Settlements, Bloomberg News reported. Ultra-easy monetary and fiscal support is helping companies avoid a liquidity crunch after the pandemic closed down businesses and demand collapsed. But that stance bears risks longer-term, said Claudio Borio, head of the Basel-based institution’s Monetary and Economic Department. “There’s a delicate balance to be struck between on the one hand withdrawing it too early, which will obliviously have short-term costs in terms of economic activity, and withdrawing it too late, which will mean that it will not favor necessary structural adjustments,” he said on Monday. Read more