In general, banks play a growth-enhancing role for the real economy. However, distorted incentives of banks, depositors, and regulators around bank insolvency may corrupt banks' credit allocation and monitoring decisions, leading to suboptimal real economic outcomes. A rules-based prompt...

Globally, financial institutions have increased their holdings of domestic sovereign debt, tightening the linkage between the health of the financial system and the level of sovereign debt, or the "financial sector-sovereign nexus," during the ongoing COVID-19 pandemic. In South Africa, the...