European banking group: Banks will stand by their customers in second Covid wave

Board members of the European Banking Federation (EBF), bringing together national banking associations from 32 countries, met on Friday by video conference, renewing their commitment to continuing playing a constructive role in the crisis. the Croatian Banking Association (HUB) said in a press release on Monday.

At this point it is not possible to assess the impact of the second wave of the Covid-19 pandemic, but it is likely that in the coming period it will be necessary to continue providing the unprecedented support to ensure effective recovery of the European economy, the HUB said.

The meeting welcomed the combined measures adopted by the EU institutions, such as the package to facilitate lending to households and businesses in the EU. It also supported a quick adoption of the capital market recovery package to make it easier for capital markets to support European businesses to recover from the crisis.

As the health situation is deteriorating, the EBF urged lawmakers to consider further measures to free additional lending capacity, such as adopting a cap of the Single Resolution Fund target level. The idea of the EU legislators was to have a fund of around €55 billion. Due to the dynamic calculation method, the fund has grown up to more than €70 billion – an increase which does not correspond with the underlying risks.

The EBF also said that new tools to deal with non-performing loans (NPL) resulting from this crisis without major economic disruptions should be considered, including a review of the NPL backstop regulation, a more pragmatic securitisation framework to stimulate the NPLs secondary market and a consistent framework for asset management companies.

EBF President Jean Pierre Mustier was quoted as saying that European banks were strong and facing the Covid-19 crisis with high capital levels.

"European banks are strong and face the crisis generated by Covid-19 with high capital levels. The sector is making a tremendous effort to encourage recovery while putting in place pre-emptive actions to manage loan loss provisions. The focus must remain on supporting the real economy, ensuring that clients and communities are equally successful in facing these unprecedented challenges. The role of the EBF is key in making sure that the regulatory environment continues to allow banks to remain an important part of the solution." Mustier said.