FRANKFURT, March 12 — The European Central Bank today loosened capital buffer rules for banks to keep lending going during the coronavirus outbreak that has dealt a “significant shock” to the global economy.
The ECB said it would allow banks to have capital buffers that are “temporarily below” levels currently required under the so-called Pillar 2 requirements.
In addition, they will be allowed to partially use equity or liability instruments that normally do not qualify as the highest quality category of capital known as Common Equity Tier 1, to meet the requirements.
Separately, the European Banking Authority said it was postponing the 2020 stress tests on banks to 2021.
“The coronavirus is proving to be a significant shock to our economies. Banks need to be in a position to continue financing households and corporates experiencing temporary difficulties,” said Andrea Enria, Chair of the ECB Supervisory Board in a statement.
“The supervisory measures agreed today aim to support banks in serving the economy and addressing operational challenges, including the pressure on their staff.”
The eased rules will be particularly welcomed by Italian banks, which are under massive pressure as the country is now the worst-affected by the coronavirus outside China.
Italy’s government has announced a €25 billion (RM120 billion) package to rescue the economy, with part of the cash injection aimed at helping small businesses that are suffering the brunt of an implosion in the number of tourists who visit the country. — AFP
