Matt Atlas

Eurozone Banks Have Enough Capital To Withstand Pandemic Hit: IMF

Eurozone banks have enough capital to withstand the effects of a pandemic and finance the economic recovery, even though they are highly exposed to sectors hard hit by the coronavirus crisis. According to the International Monetary Fund (IMF).

“Although the pandemic significantly depletes banks’ capital, their reserves are high enough to withstand the likely effects of the crisis,” the IMF said. “With the right policy, banks will be able to support the recovery with new loans.”

According to IMF projections from January this year, banks in 19 euro-paying countries will remain largely resilient to last year’s deep recession and cope with only a partial recovery. None of the banks should violate the minimum capital requirement of 4.5 percent.

The IMF also stressed the importance of government assistance policies for banks, including reducing capital requirements, debt moratoriums, loan guarantees, postponing insolvency proceedings, grants, tax breaks, and wage subsidies for companies. Reuters reported that the eurozone is already benefiting from such measures, with a value of around 19 percent of gross domestic product (GDP).

The Monetary Fund also stated that banks should gradually rebuild capital reserves to maintain their lending capacity.

Restrictions on the payment of dividends and the repurchase of treasury shares should also be maintained until the recovery has fully started.