BRUSSELS, 25 March 2020 – ESBG members welcome initiatives being taken in Europe to support the economy at this difficult time.
>> Learn more: Efforts by savings and retail banks
Actions such as reducing counter-cyclical buffers, enabling the use of capital and liquidity buffers, as well as fiscal and budgetary changes are part of the flexibility needed. We consider liquidity contributions and bridging loans from governments as indispensable right now. Help from the public side creates trust, supports companies in securing their existence and ensures employment and income for the people concerned. The more successful this is, the less need there will be for stabilisation of overall economic demand.
The European Central Bank has already stated it will ease some regulatory requirements including the conditions for targeted longer-term refinancing operations (TLTRO), which is a great bank lending support to those affected most by the spread of the coronavirus. Furthermore, the ECB announced plans for extra asset purchases, which is another very useful measure to support the real economy and the public sector. ESBG members also appreciate that the ECB Banking Supervision provides temporary capital and operational relief in reaction to coronavirus as well as additional flexibility regarding the treatment of non-performing loans to ensure banks can continue to fulfil their role to fund the real economy.
The European Supervisory Authorities have also taken commendable actions to help alleviate the immediate operational burden for banks, in particular the European Banking Authority decision to postpone the stress tests until 2021 will allow banks to focus on and ensure continuity of their core operations, including support for their customers.
Unavoidable and much needed: increase financial firepower through spending
Finally, we think that it is unavoidable that the European Union spends money in order to increase the financial firepower. At its meeting mid-March, we understand that the 19 Eurozone members have decided fiscal measures of about 1% of gross domestic product for 2020 and the provision of liquidity facilities of at least 10% of the GDP to support the economy – a welcome step in the right direction.
All of this is much needed, in our opinion, and will help support economic activity, employment, and price stability. In an annex to this letter, we are sharing with you some additional measures which would be important to be implemented to help savings and retail banks fulfil their role in this economically challenging period.