Make Kitco Your Homepage

ECB's Stournaras: Many euro zone banks underestimate credit losses from pandemic

Kitco News

ATHENS (Reuters) - Many euro zone banks underestimate credit losses they are likely to incur from the COVID-19 pandemic and supervisors will focus on asset quality this year, European Central Bank Governing Council Member Yannis Stournaras said on Friday.

“There is a widespread view that many banks in the euro area underestimate their credit losses due to the pandemic, especially for the performing customers that are currently benefiting from payment deferrals,” he told a banking forum.

Stournaras, who is the governor of Greece’s central bank, said the asset quality of European lenders would be at the epicentre of supervisory action this year.

Despite a projected economic recovery in 2021, risks remain elevated, he said.

“The resurgence of the pandemic and the new round of restrictive measures across Europe could lead to a longer and deeper recession, associated with a wave of corporate defaults, rising non-performing loans and job losses.”

Stournaras also said low interest rates, coupled with a sluggish economic recovery, pose a big challenge for European banks, “with clear implications for their core profitability and capital generation capacity”.

Commenting on loans under payment moratoria, which differ across countries and sectors, he said banks should take action to frontload the recognition of credit losses.

Reporting by George Georgiopoulos; Editing by Gareth Jones/Mark Heinrich

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.