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This study develops on the status quo in relation to the assessment of resolvability of credit institutions and banking groups in the Banking Union and the removal of substantive impediments to their resolvability under the EU legal framework governing banking resolution, as in force, taking due account of the policies developed in that respect by the Single Resolution Board within the Single Resolution Mechanism.

This note is prepared in view of a regular public hearing with the Chair of the Supervisory Board of the European Central Bank (ECB), Andrea Enria, which will take place on 14 October 2021. The briefing addresses: 1) Emerging risks in the banking group, as presented to the Eurogroup, 2) results of EBA’s and ECB’s 2021 stress test exercises, 3) the Basel Committee report on early lessons from the Covid-19 pandemic on the Basel reforms, 4) the ECB report on sanctioning activities, 5) the ECB Supervisory ...

The original full study presents data from 27 banking groups in 10 EU Member States, where it is found that banks have used COVID-19 relief measures extensively, with some cross-country differences as for the intensity of use. Flexibility in risk classification does not seem to have impaired banks’ ability to report and recognise risk properly, even for loans under moratoria. The findings suggest that the impact of the measures on banks’ credit supply has been overall positive and mainly driven ...

As the COVID-19 pandemic hits all Member States severely, some initial signs are surfacing of what is likely to be a substantial increase in bank non-performing loans (NPLs) in the coming months. Strengthening the tools needed to face the problems caused by NPLs is therefore of foremost importance. This paper argues that asset management companies (AMCs) can be an effective tool in this direction. It further discusses the legal issues related to their implementation, presenting several examples from ...

This document presents summaries of seven external papers commissioned by the European Parliament in November 2020 upon request of the Economic and Monetary Committee (ECON). Papers were delivered, analysed and published in March 2021. ECON has requested its Banking Expert Panel to address the topic of “Non-performing Loans – New Risks and Policies”.

This document presents the summaries of four external papers commissioned by EGOV in November 2020 upon request of the Economic and Monetary Committee (ECON). Papers were delivered, analysed and published in March 2021. ECON has requested its Banking Panel to address the question of when and how to unwind COVID-support measures to the banking system.

Bank loans increased considerably in 2020, due to an unprecedented wave of extraordinary measures aimed at supporting bank borrowers. Where constraints posed by public-sector deficits were tighter, the response was more focused on contingent/fiscally-neutral measures (e.g. public guarantees and moratoria), which might lead to greater unbalances in the future. Post-Covid recovery can be expected to be selective in nature, both across industries and within. Accordingly, emergency measures cannot simply ...

This paper discusses policy implications of a potential surge in NPLs due to COVID-19. The study provides an empirical assessment of potential scenarios and draws lessons from previous crises for effective NPL treatment. The paper highlights the importance of early and realistic assessment of loan losses to avoid adverse incentives for banks. Secondary loan markets would help in this process and further facilitate bank resolution as laid down in the BRRD, which should be uphold even in extreme scenarios ...

The COVID-19 crisis is a significant and exogenous shock to the EU corporate sector, with implications for the operations and funding of many businesses. We compare key indicators for the global financial crisis (GFC) and the current situation, and assess implications for the policy response. We find that while many policy actions taken in response to the GFC remain valid, the nature of COVID-19 suggests a more tailored response is appropriate, with support focused on sectors most directly affected ...

This paper reviews the main differences between the prospects for NPL build-up and resolution between the current pandemic and the financial crisis of 2008-2009. To facilitate NPL reduction following the pandemic, the ECB should actively counter the revealed tendency of banks with low profitability to implement relatively low loan loss provisions.