How Will the ECB Fight the Economic Impact of the Virus Outbreak?
The European Central Bank plans to let banks run lower capital ratios to deal with fallout from the coronavirus, according to people familiar with the matter.
The flexibility on dipping into capital buffers is part of measures designed to support the euro-area economy, said the people, who asked to remain anonymous as the matter is private.
A spokeswoman for the ECB declined to comment on Thursday in Frankfurt.
European policy makers are rushing to provide stimulus and make sure banks continue to provide credit, as the spread of the novel virus wreaks havoc on the economy and threatens to push up bad loans. The ECB’s moves come a day after the Bank of England cut rates and introduced a series of emergency measures, including lower capital requirements and a lending program for smaller companies.
Since the credit crunch, regulators have demanded that banks reduce risk and bolster their financial strength to be able to swallow losses without resorting to taxpayers for a bailout. Those requirements started to plateau this year, leading several banks to promise higher dividends and even plans to repurchase stock from investors battered by the industry’s years of underperformance.