Eurozone banks underestimate credit losses, Stournaras warned

Eurozone banks underestimate credit losses, Stournaras warned

Many banks in the euro area underestimate the credit losses they are likely to suffer as a result of the COVID-19 pandemic. And bank supervisors will focus on asset quality this year. Jannis Stournaras, a member of the Governing Council of the European Central Bank (ECB), pointed this out. Stournaras, who is also the governor of the Central Bank of Greece, believes that many banks in the Euroregion underestimate loan losses due to the pandemic, especially for clients who currently benefit from deferral. He pointed out that the quality of the assets of European creditors will be the focus of the relevant supervisory authorities this year. Despite the expected economic recovery in 2021, according to him, increased risks persist in the banking sector. Another wave of the pandemic and a new round of restrictive measures across Europe could lead to a prolonged and deeper recession associated with a wave of corporate bankruptcies, rising credit default and job losses, he noted. Stournaras said that low interest rates, together with a slow economic recovery, posed a major challenge for European banks "with clear implications for their underlying profitability and capacity to generate capital".