ECB Freed Up $112 Billion at Banks to Bolster Credit Amid Virus
The ECB allowed banks to operate with lower capital buffer and use subordinated debt to help meet their individual requirements.
(Bloomberg) --
The European Central Bank freed up about 100 billion euros ($112 billion) of bank capital to maintain the flow of credit amid the spread of the coronavirus, according to a top regulator.
The money will be available for lending after the ECB decided to allow banks to operate with lower capital buffer and use subordinated debt to help meet their individual requirements, European Banking Authority Chairman Jose Manuel Campa said on Bloomberg TV.
“Banks are well capitalized and they’re operationally ready to confront the situation,” Campa said in an interview with Anna Edwards and Matt Miller on Monday.
Campa said the figure is based on the ECB’s announcement on Thursday as well as “the range of analyst estimates that I have seen.” The total amount of equity that banks can access is actually higher because lenders will also be able to dip into their so-called capital conservation buffer.
Policy makers around the world are rushing to provide stimulus and make sure banks continue to provide credit, as the spread of the virus wreaks havoc on economies and threatens to push up bad loans. European regulators are freeing banks to put much of their financial cushion to work and as well as relaxing other demands.
“We stand ready to do whatever is needed as the situation evolves, but the key message at this stage from our part is that banks should focus on their operational capabilities and make sure they address the very difficult situation,” Campa said.
--With assistance from Jana Randow, Matthew Miller and Anna Edwards.
To contact the reporters on this story: Alexander Weber in Brussels at aweber45@bloomberg.net;Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net
To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen
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