How the EBA wants to undermine the European credit system

22 March 20213 years ago babelfish

What does it take to shatter the credit sector, cause some bank cracks and then generate a good credit crunch? It is enough to be at the quida of the EBA, the European Banking Authority, and not have an idea of the effects of one's words.

As reported by Bloomberg, the EU's top banking regulator has urged lenders to promptly write off bad loans as soon as the pandemic is over, because, according to the institution, and "zombie" businesses could harm economic recovery.

Jose Manuel Campa, president of the Paris-based European Banking Authority, said in an interview on March 19 that regulators expect non-performing loans "to increase to a significant amount" in the coming quarters, after a year of government support for borrowers and banks have suppressed defaults. There should therefore be " recognition as soon as possible " of the losses, Campa said. Although EU banks set aside billions of euros to cover these NPLs, the actual bad loan ratio dropped to 2.6% at the end of last year, which Campa called "paradoxical" while Covid-19 plunged the economy in a recession. “You need to do a risk-by-risk, position-by-position assessment and try to adequately address those risks,” said Campa. The longer borrowers rely on paid vacation, "the more likely you'll see cliff effects because the more likely those loans have deteriorated over such a long period of time," he said. “There will likely be companies that simply haven't exhibited profitable business models and need to get out of business and need to be liquidated,” Campa said. EBA is optimistic about maintaining UK-EU banking ties European Banking Authority President Jose Manuel Campa comments on post-Brexit banking on Bloomberg Television. (Source: Bloomberg)

The banks themselves have more capital to meet losses than the financial crisis, but Campa said authorities and industry still need to guard against creating " zombie banks " that delay taking on loan losses but also hold back new ones. loans.

So in summary:

there is an economic crisis which, however, has not yet turned into a crisis of the banking system;
the crisis has been avoided, so far, because between state-guaranteed loans and slightly more inclusive banks, which do not aim to fill up with NPLs at a time when they could not even enforce guarantees, NPLs have not exploded in the middle of a economic crisis;
since the disaster is not there yet, what Campa does, calls on the banks to be ruthless, to blow up companies like bottle caps;
naturally this will erode the assets of the banks which, in order to maintain the various capitalization ratios, will be forced to cut loans, causing a credit squeeze;
maybe some banks could even jump, to the delight of shareholders and junior savers;
the economic crisis will intensify turning into a banking crisis;
only the vulture funds will enjoy.

This is what the EBA, the European Banking Authority, clearly wants. As citizens, debtors and savers you must be well aware that in Europe there is an entity that works for your ruin under the pretext of eliminating the Zombie companies. Without realizing that companies in difficulty are NOT because they are not profitable, because they have been closed for months by order of their respective governments and experience sudden and forced tourist flows. real Zombie companies are usually large companies that enjoy semi-monopolistic or near-monopoly positions, without which they would melt like snow in the sun.

At a time when we need to help the economy recover, Campa goes in the opposite direction. Make a note of it, because this will will cause great economic, political and social damage. Remember who is responsible for it.

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The article How the EBA wants to undermine the European credit system comes from ScenariEconomici.it .

This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/come-leba-vuole-mandare-in-crisi-il-sistema-creditizio-europeo/ on Mon, 22 Mar 2021 17:28:13 +0000.