Covid-19, Bank Capitalization and Resolution
Wednesday, 25 November 2020, 12:15-13:30 p.m. CET via Zoom
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Kerstin af Jochnick (Single Supervisory Mechanism, European Central Bank)
Thomas Huertas (Leibniz Institute SAFE)
Jan Reinder de Carpentier (Single Resolution Board)
Rolf Strauch (European Stability Mechanism)
Introduction and Moderation:
Tobias Tröger (Director Research Cluster "Law and Finance", SAFE)
The pandemic has already triggered a severe economic downturn that will arguably deepen significantly in a second wave currently rolling across Europe. Government responses thus far focused on supporting ailing corporates and small entrepreneurs. Yet, it seems questionable that these measures will indeed shield the banking sector in a prolonged recession. There are already indicators that show higher expected loan losses at financials. Therefore, policy makers should pay close attention also to the potential repercussions of the pandemic in the banking sector. Are banks sufficiently capitalized to withstand the shock and to support the recovery later down the road? If not, is the current European regulatory framework apt to address the impending challenges? Will the resolution of some banks and a consolidation of the whole banking sector remedy shortfalls and allow banks to finance a speedy come-back of the economy? Do we need capital injections from sovereign coffers and if so, how should they look like? Where could the funds come from and what institutional reforms would be necessary on the European level?
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