ECB Warns Banks That Straw Pots Must Be Fuller
European banks need to keep in mind that they will have to set aside even more money for loans that may not be repaid. The European Central Bank (ECB) warned against this.
He stated that the likelihood that companies will run into problems increases as soon as government support because of the corona crisis ends.
The amounts of money that European banks have in the pot are lower than in previous crises and also lower than with American peers, the ECB said in a report on financial stability.
This is partly because European governments and the central bank have mitigated the risk of bankruptcy with support for companies.
Still, it is also caused, according to the ECB, by the low profitability of banks that simply cannot put more money aside.
Excessive corona support also poses risks for the banking sector, the ECB believes. This could create uncertainty about debt sustainability in the long run.