Banks Must Take into Account the Loss of Russian Gas from the ECB
The European Central Bank (ECB) will soon also ask banks to include the option of a complete stoppage of Russian gas in their risk calculations.
If Moscow completely turns off the gas tap to Europe, it will probably cause a strong economic downturn forcing banks to write off their loans.
The ECB wants to see what impact a recession or Russian gas boycott will have on banks’ capital buffers. The central bank takes those prospects into account when approving or not approving the dividend plans of major banks in the eurozone. Andrea Enria, the ECB’s head of supervision, told the European Parliament.
The outlook for banks has deteriorated, partly due to the Russian invasion of Ukraine and high inflation, as more loans may now be unpaid. Until the end of September last year, the ECB urged banks not to pay dividends due to the economic impact of the corona pandemic. This made the financial concerns less popular on the stock exchanges. Even after the dividend ban, the regulator urged lenders to be very careful with capital payments to shareholders.
The threat that Russia will no longer supply gas to European countries at all seems to be becoming more and more real. Economic superpower Germany, largely dependent on Russian gas for its energy, receives only 40 percent of the normal amount of natural gas from Russia via the important Nord Stream pipeline.
If no more gas comes out of the country at all, the German economy could shrink by 12.7 percent, an umbrella organization for the German business community recently estimated.