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Reviving and Restructuring the Corporate Sector Post-Covid

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Reviving and Restructuring the Corporate Sector Post-Covid Reviving and Restructuring the Corporate Sector Post-Covid DESIGNING PUBLIC POLICY INTERVENTIONS DISCLAIMER This report is the product of the Group of Thirty’s Steering Committee and Working Group on Corporate Sector Revitalization and reflects broad agreement among its participants. This does not imply agreement with every specific observation or nuance. Members participated in their personal capacity, and their participation does not imply the support or agreement of their respective public or private institutions. The report does not represent the views of the membership of the Group of Thirty as a whole. ISBN 1-56708-181-9 Copies of this paper are available for US$25 from: The Group of Thirty 1701 K Street, N.W., Suite 950 Washington, D.C. 20006 Telephone: (202) 331-2472 E-mail: [email protected] Website: www.group30.org Twitter: @GroupofThirty Reviving and Restructuring the Corporate Sector Post-Covid DESIGNING PUBLIC POLICY INTERVENTIONS Published by Group of Thirty Washington, D.C. December 2020 Working Group on Corporate Sector Revitalization STEERING COMMITTEE Mario Draghi, Co-Chair Jason Furman Former President, European Central Bank Professor of the Practice of Economic Policy, Former Governor, Banca d’Italia Harvard University Former Chairman, U.S. Council of Economic Advisers Raghuram Rajan, Co-Chair Professor of Finance, Chicago Booth School of Business Tharman Shanmugaratnam Former Governor, Reserve Bank of India Senior Minister, Singapore Chairman, Monetary Authority of Singapore PROJECT DIRECTORS Douglas Elliott Victoria Ivashina Partner, Oliver Wyman Lovett-Learned Professor of Business Administration, Harvard University WORKING GROUP MEMBERS Gerd Häusler Hélène Rey Member of the Supervisory Board, Munich Reinsurance Lord Bagri Professor of Economics, Former Chairman and CEO, Bayerische Landesbank London Business School Former Professor of Economics and International John Heimann Affairs, Princeton University Senior Advisor, Financial Stability Institute Former Comptroller of the Currency, United States Masaaki Shirakawa Distinguished Guest Professor, Gail Kelly Aoyama-Gakuin University Senior Global Advisor, UBS Group AG Former Governor, Bank of Japan Former CEO and Managing Director, Westpac Banking Corporation Yi Gang Governor, People’s Bank of China GROUP OF THIRTY v EXPERTS Andrew Bailey, Oliver Wyman Stuart Mackintosh, Group of Thirty Sofia Price, Oliver Wyman vi Reviving and Restructuring the Corporate Sector Post-Covid Contents Foreword ....................................................................................................................................................................................................................................ix Acknowledgments ................................................................................................................................................................................................................ x 1 Executive summary ......................................................................................................................................................................................................1 1.1 The situation ................................................................................................................................................................................................................. 1 1.2 The response ................................................................................................................................................................................................................. 1 1.3 Core principles ............................................................................................................................................................................................................ 2 1.4 Making hard choices ................................................................................................................................................................................................. 4 1.5 Potential tools .............................................................................................................................................................................................................. 5 1.6 Decision framework .................................................................................................................................................................................................. 5 1.7 Time to act .................................................................................................................................................................................................................... 6 2 Introduction ......................................................................................................................................................................................................................7 2.1 Policy objectives ......................................................................................................................................................................................................... 7 2.2 Report scope, structure, and conceptual approach ...................................................................................................................................... 8 3 The unique economic challenges presented by the Covid-19 pandemic and the initial policy response .................9 3.1 The unique economic challenges presented by Covid-19........................................................................................................................... 9 3.2 The first wave of policy responses .....................................................................................................................................................................13 3.3 Why we have not yet seen major solvency issues ...................................................................................................................................... 14 3.4 Why the existing measures are insufficient .................................................................................................................................................. 16 4 Targeting: Which companies to assist, and why? .....................................................................................................................................17 4.1 What are your priorities? .......................................................................................................................................................................................17 4.2 What resources do you have available? .......................................................................................................................................................... 18 4.3 Where are there market failures with substantial social costs? ........................................................................................................... 19 4.4 Which firms should be assisted through public policies to address these market failures? ..................................................... 20 5 Governance: Who decides which companies to assist? ....................................................................................................................25 5.1 How should the viability and needs of individual firms be determined, and by whom? ..............................................................25 6 Design and implementation: How to assist them? ...............................................................................................................................29 6.1 What public support could be provided? .......................................................................................................................................................29 6.2 How should the chosen intervention be structured? ................................................................................................................................ 30 6.3 When should the interventions be made, and for how long? ................................................................................................................47 6.4 Is additional action needed to prevent spillovers to the financial sector? ...........................................................................................47 7 Recommendations for policymakers: Putting this into practice ..................................................................................................53 7.1 Ten core principles for policymakers ................................................................................................................................................................53 7.2 Decision framework ................................................................................................................................................................................................55 7.3 Putting these recommendations into practice ..............................................................................................................................................55 8 Conclusion ....................................................................................................................................................................................................................... 57 APPENDIX A: Emerging pandemic business interruption insurance proposals post-Covid 19 ......................................59
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