The outbreak of COVID-19 (Coronavirus) and its global spread since February has created significant immediate challenges to society and risks for the economic outlook. Although the long-term magnitude of the economic shock cannot yet be quantified, it will likely dampen economic activity.
Since the financial crisis, European banks have strengthened their capital position, built up solid liquidity buffer and improved the quality of the assets on their balance sheets. EU banks have implemented measures to ensure business continuity and adequate service to their customers, but they are facing operational challenges, hence the need to focus on their core operations and critical functions. Supervisors are working with banks as they maintain their support to household and corporate sectors, particularly to small and medium enterprises, and ensure that the basic needs of their customers are satisfied.
The EBA, along with national competent authorities (CAs) and the European Central Bank, is coordinating a joint effort to alleviate the immediate operational burden for banks at this challenging juncture. The EBA recommends CAs to make full use, where appropriate, of the flexibility embedded in the regulatory framework to support the banking sector.