Supervisors around the world stand together against COVID-19

The European Central Bank (ECB) and the European Banking Authority (EBA) have both announced an important set of measures related to COVID-19 to ensure that banks under its supervision can continue to serve the economy, as the economic impact of the virus becomes more apparent.

The measures implemented by the ECB shall provide temporary capital and operational relief, to allow them to continue serving the economy and address operational challenges, including pressure on their staff. The main measures that shall be implemented within the banking industry are the following:

• Banks will be allowed to operate temporarily below the level of capital defined by the Pillar 2 Guidance, the capital conservation buffer and the liquidity coverage ratio (LCR). The ECB considers that these measures will be enhanced if national authorities would relax the requirements of the level of the countercyclical buffer applied within their banking sectors;
• To meet the Pillar 2 Requirements, Banks are allowed to partially use capital instruments that do not qualify as Common Equity Tier 1 capital (eg. Additional Tier 1 or Tier 2 instruments). This measure was scheduled to become effective starting January 2021, as part of the revised Capital Requirements Directive (CRD V).

This article provides further insight on tailored measures for individual banks regarding adjustments of timetables, processes and deadlines.