EU to offer banks capital relief to help coronavirus-hit firms: sources
EU banks are to receive more capital relief so they can help companies struggling in the coronavirus pandemic, without having to make crippling loan provisions to reflect a looming deep recession, sources said on Monday, Trend reports citing Reuters.
The bloc’s financial services chief Valdis Dombrovskis is expected on Tuesday to propose that the EU “emulate in some form” a move by the U.S. Federal Reserve to allow banks to ease how they calculate their leverage ratio, sources familiar with the package said.
The ratio is a yardstick of solvency that measures capital against total assets on a non-risk-weighted basis.
The Fed proposed that until March 2021 banks do not have to include holdings of U.S. government bonds and deposits parked at the central bank in their assets tally for calculating the leverage ratio.
This would free up their balance sheet to offer more loans to companies during the pandemic.
The EU package comes on top of regulators allowing banks to tap some of their buffers to ensure continuity in lending.
Bankers said there could be political opposition to excluding government debt, even on a temporary basis.