Eased rules on the capital buffers that lenders supervised by the European Central Bank must hold to weather crises will free banks up to issue as much as 1.8 trillion euros ($1.9 trillion), the institution said Friday.
With lower capital requirements, 120 billion euros is "available for banks to absorb losses without triggering any supervisory actions or to potentially finance up to 1.8 trillion euros of loans to households and corporate customers in need of extra liquidity," the ECB said in a statement.
The central bank had relaxed requirements on March 12 as part of a major package of measures aimed at keeping cash flowing during the coronavirus pandemic, which has left thousands of businesses shuttered and forced large numbers of employees to cut their working hours.
The ECB's banking supervision arm, which watches over 120 of the biggest eurozone financial firms, also said it would update the way it oversees banks' lending operations, in part to take into account massive crisis-fighting support offered by eurozone governments.
Matching steps from other major central banks, including the Bank of England, it hopes to ensure rules supposed to make banks themselves more robust do not have the "procyclical" side effect of squeezing lending to the real economy just as the crisis bites.
"Supervisors will exercise flexibility regarding the classification of debtors as 'unlikely to pay' when banks call on public guarantees granted in the context of coronavirus," the ECB said.
Comments
Comments are closed.