COVID-19: How Will European Banks Fare?

ByShekhar Aiyar, Mai Dao, Andreas Jobst, Aiko Mineshima, Srobona Mitra, Mahmood Pradhan

March 26, 2021

Disclaimer: The views expressed herein are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper evaluates the impact of the crisis on European banks’ capital under a range of macroeconomic scenarios, using granular data on the size and riskiness of sectoral exposures. The analysis incorporates the important role of pandemic-related policy support, including not only regulatory relief for banks, but also policies to support businesses and households, which act to shield the financial sector from the real economic shock.

Subject: Bank capital, Bank risk management, Capital adequacy requirements, Corporate profits, Countercyclical capital buffers, Europe, External balance assessment (EBA), External position, Financial institutions, Financial regulation and supervision, Loans, Nonperforming loans, Stress testing

Keywords: Bank capital, bank profitability, Capital adequacy requirements, corporate risk, Countercyclical capital buffers, COVID-19, debt service moratoria, EBA sample, EBA transparency Exercise, ECB analysis, ECB-Banking Supervision, Europe, External balance assessment (EBA), Global, hurdle rate, IMF staff calculation, loan default, Loans, Nonperforming loans, operating income, return on assets, return on equity, stress test, working capital

Pages:
114
Volume:
2021
DOI:
https://doi.org/10.5089/9781513572772.087
Issue:
008
Series:
Departmental Paper No. 2021/008
Stock No:
CHWEBFEA
ISBN:
9781513572772
ISSN:
2616-5333

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