Financial Stability amidst the Pandemic Crisis: On Top of the Wave, by Christos Gortsos/Wolf-Georg Ringe (eds.), pp. 25-59, Jul 2021

When and How to Unwind COVID-Support Measures to the Banking System?

This in-depth analysis proposes ways to retract from supervisory COVID-19 support measures without perils for financial stability. It simulates the likely impact of the corona crisis on euro area banks’ capital and predicts a significant capital shortfall. We recommend to end accounting practices that conceal loan losses and sustain capital relief measures. Our in-depth analysis also proposes how to address the impending capital shortfall in resolution/liquidation and a supranational recapitalisation.