This report evaluates the impact of the COVID-19 crisis on European banks' capital under various macroeconomic scenarios, using data on the size and riskiness of sectoral exposures. It incorporates the role of pandemic-related policy support, including regulatory relief for banks and policies to support businesses and households. It addresses a broad set of banks, including smaller banks within the euro area, as well as those of most European countries outside the area. It aims to quantify the impact of the pandemic and policy support on bank capital and considers the implications of baseline and adverse GDP growth and unemployment paths on bank capital at the end of 2021, as well as what the bank capital level would have been without support measures. It also incorporates sector-specific shocks to the economy, country-specific borrower support measures, bank-specific corporate exposures, and how banks are impacted by borrower support measures like debt moratoria, credit guarantees, and deferred bankruptcy proceedings. It describes the financial soundness of European banks before the pandemic, their vulnerability to pandemic-related shock, key policy measures that have a direct or indirect impact on banks, the analytic framework and results of the analysis, and policy implications. Annotation ©2021 Ringgold, Inc., Portland, OR (protoview.com)
