EU financial institutions facing unprecedented challenges

The European Banking Authority (EBA) has published a preliminary assessment of the impact of COVID-19 on the European Union (EU) banking sector. The main findings of the assessment are:

  • Financial institutions entered the crisis more capitalized and with better liquidity compared to previous crises.
  • The crisis will have a negative impact on asset quality, with non-performing loan volumes growing to levels (potentially) as high as those recorded in the aftermath of the sovereign debt crisis.
  • Financial institutions have been using their liquidity buffers and are expected to continue using them in the coming months as the issuance of new unsecured debt has nearly come to a complete halt.
  • The operational resilience of financial institutions is under pressure due to many being unprepared to have staff work remotely as well as an unprecedented volume of applications for debt moratoria.

Read the full assessment here.