Eurozone Banks Are Resilient to Coronavirus-Related Economic Shocks – ECB
The banking sector in the eurozone is resilient to the stress caused by the fight against the novel coronavirus, the European Central Bank said.
« The ECB’s assessment has shown that the banking sector in the eurozone is resilient to the stress caused by the coronavirus… The results show that the banking sector in the eurozone can withstand the stress caused by the pandemic, but if the situation worsens, the depletion of bank capital will be significant, » it says.
Under the main scenario, the total capital ratio of banks CET1 will decrease by about 1.9 percentage points by the end of 2022 – to 12.6%. With this development of events, banks will be able to continue lending to the economy, the regulator notes.
Under the harsh scenario, the indicator may decrease by 5.7 points – to 8.8%.
In this case, « several banks will need to take action to continue to meet their minimum capital requirements, but the overall deficit will remain contained, » the ECB said.
The main scenario provides for a decrease in real GDP of the eurozone by 8.7% in 2020 and its growth by 5.2% and 3.3% in 2021 and 2022. The harsh scenario assumes a 12.6% drop in GDP in 2020 and growth of 3.3% and 3.8% in 2021 and 2022, the release notes.