Minus 380 billion euros. Europe’s banks suffer losses because of the pandemic

27-05-2020

During the pandemic, banks in Europe suffered losses of 380 billion euros, or $415 billion. Nevertheless, Financial Times says that many of them will survive the crisis.

The European Banking Authority conducted a stress test in 2018 and now predicts that the value of risk-weighted assets will fall by 2.3 to 3.8 percent. One percent corresponds to 100 billion euros. This was due to the fact that central banks softened the capital requirements for banks by 2 points in time.

Because of the COVID-19 pandemic, the EBA is worried about a possible deterioration in the quality of bank assets. European banks were holding a delinquency rate of 3.1 percent by the end of 2019. That figure is now lower.

The EBA is worried about a more difficult environment for attracting investment and financing. Unsecured debt issuance has been put on hold until the second half of April. 20% of the securities must be closed within six months and another 10% by the end of 2020. The trend now is toward more difficult interbank lending and financing in the dollar segment.

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