COVID-19 relief loans in EU exceed € 870 billion, banking watchdog says
LONDON (Reuters) – Bank loans totaling 871 billion euros (£ 778.9 billion) have benefited from COVID-19 relief measures in the European Union, the body said on Friday banking watchdog, in its first assessment of the potential problem loan pipeline.
Moratoriums or relief measures such as payment holidays and government guarantees were rushed after economies were locked in in March to fight the pandemic.
About 17% of loans subject to relief were classified as “phase 2” at the end of June, meaning that banks are required to start provisioning for potential losses – more than double the share of the government. total loans, said the European Banking Authority.
“Banks must remain vigilant and constantly assess the quality of the assets of these exposures,” added the watchdog.
Cypriot, Hungarian and Portuguese banks held the highest share of total loans subject to relief, with French, Spanish and Portuguese banks having the highest volumes.
The total of 871 billion euros represents 6% of total bank loans out of a sample of 130 lenders, with 16% of loans to small businesses benefiting from moratoriums, followed by 12% of commercial real estate loans and 7% of mortgages. , said the ABE.
About half of moratorium loans were due to expire by September, and 85% of loans were to expire by next month.
Graphic: EBA moratoriums 1 – here a “cliff edge” effect of the expiration of moratoria, coupled with a prolonged slowdown, could lead to a sudden and significant increase in the level of non-performing loans, EBA said.
He noted that the second wave of COVID-19 had already led some countries to extend moratoria beyond the end of the year, but warned: “The continuation or persistence of moratoria can also have a side effect of a Potential systemic risk to financial stability, as borrowers can develop a “no-pay” culture.
The EBA will publish the results of its transparency exercise to provide detailed bank-by-bank loan data on December 11.
Graphic: EBA moratoriums 2 –
Reporting by Huw Jones; Editing by Catherine Evans