“EU banks urged to prepare for bad loans as pandemic hits economy” - a prediction made by the chair of the Single Resolution Board
20 November 2020
European banks need to prepare their balance sheets for the risk of pandemic-induced non-performing loans hitting them next year, Elke König, Chair of the Single Resolution Board has said in an interview to Financial Times. Just last month, the ECB’s top bank supervisor Andrea Enria wrote in the FT magazine that, in a “severe but plausible” scenario, non-performing loans at eurozone banks could reach €1.4tn, well above the levels of the 2008 financial crisis and the ensuing EU sovereign debt crisis.
Even though it may be too soon to make an exact estimation on NPLs volume, they could start coming through in Q1 and Q2 of 2021. Thus, the best thing that the banks could do is to address them early, and then it is steering through the fog.
In this alert, you will read about the work that has been done to strengthen the bank’s resilience and ensure that they can be safely resolved if they fail, as well as about the type of action that is being taken by the EBA.