ECB vice expects the banks' profitability to remain weak
The European Central Bank (ECB) sees dangers for the stability of the financial system in the euro area in view of the corona pandemic and the consequences for the economy. The massive economic policy aid measures provided support so that the risks were contained in the short term, the ECB said on Wednesday in its six-month financial stability report.
But a hasty end to aid such as government loan guarantees and loan moratoriums could put pressure on firms and households. According to the central bank, companies could then be more vulnerable “than at the height of the global financial crisis” in 2008/2009. With a renewed willingness to take risks, especially with investment funds, as well as excessive prices of some assets, the risk of price corrections also increases.
“It is to be expected that the profitability of the banks will remain weak,” warned ECB Vice President Luis de Guindos. Credit losses are expected to be delayed due to government bailout programs. Overall, according to the ECB, the vulnerability of banks and companies will increase in the medium term as a result of the crisis.
