📰 EBF Morning Brief - Tuesday 7 April

FROM THE MEDIA

NYT: Banks are prepare for a crisis. But not this one.

The financial impact of the coronavirus surpasses the old worst-case scenarios, threatening a credit crunch or even a new financial crisis, says the New York Times. The European financial system is stronger than it was during the last crisis. Political leaders centralized oversight of lenders at the European Central Bank. That has helped prevent the bickering and political jockeying among national bank supervisors that hampered crisis management in the past. New rules forced banks to reduce their reliance on borrowed money and build up their capital reserves. “We can hold out at least for some time,” said Wim Mijs, chief executive of the European Banking Federation, an industry group. “If you bring the whole economy to a stop for six months, well, then we will have to see.” Read more (€)

Bloomberg: SMEs are main concern, EBA says

In an video interview with Bloomberg, Chairman of the European Banking Authority Jose Manuel Campa said that banks across Europe are already supporting their clients with various liquidity mechanisms and sometime moratoria. But it is important to protect all links in the economic chain as smaller European businesses and SMEs are likely to pay a heavier price than bigger companies, Mr Campa said. Read more

FT: Ana Botin: the EU’s shared purpose requires shared financing

Ana Botin, Chairwoman of the largest Spanish bank Santander writes in an op-ed that the EU is facing a moment of truth, one that will not return the world to pre-corona situation. Ms Botin also emphasises the need for national government guarantees in every country for all companies, but especially SMEs. Read more (€)

CNBC, Euractiv: EU moves closer to using joint crisis fund

There is growing optimism that euro zone finance ministers will approve new funding to the countries wrestling with the coronavirus pandemic, but division over so-called “corona bonds” is likely to remain, report various media. EU economies are at a standstill after many governments implemented national lockdowns including all non-essential businesses maintaining closed doors across most nations. Political pressure has resurfaced old divisions among member states. However, three Brussels-based officials, told CNBC that member states are now moving toward an agreement. Euractiv confirms that EU countries are nearing an economic rescue plan for affected nations. However, with deep divisions between the rich northern countries and those in the south with heavy debt, ministers were expected to sideline a proposal to issue “coronabonds” which would pool borrowing among EU nations to fight the crisis. The FT reports that the European Commission is considering proposals that would allow EU member states to help companies through the injection of equity, the latest move aimed at relaxing state aid rules to tackle the coronavirus crisis. Read more Euractiv FT(€)

American Banker: U.S. banks to support paying dividends

While banks in the euro zone and the U.K. have been ordered or pressured to suspend dividend payments, U.S. banks will likely be allowed to keep paying dividends to shareholders amid the risks that the current crisis brings to society and banking system, reports ABA. But Federal Reserve officials are unlikely to order them to stop in the nearby future. They see key differences in how lenders distribute capital on the two continents, and they plan to conduct a more deliberate analysis of the U.S. banking system’s health. According to the FT America’s biggest banks will defend their plans to continue paying dividends in submissions to regulators. The banks argued that European banks are different and that in the U.S. it would be destabilising investors. Read more FT(€)

EBF IN THE NEWS

Digital Operational Resilience Framework: EBF key messages

The EBF fully supports the initiative of the European Commission to bring forward legislative proposals for fostering the digital operational resilience framework for financial services with a view to harmonising rules across the EU. The interconnectedness of all actors within the financial ecosystem, incl. third party providers and the evolution of ICT risks highlight the need for a common level of minimum security for the financial sector as a whole, based on international coordination. Read more

Life sometimes is a storm - Prof. Annamaria Lusardi

Professor Annamaria Lusardi, Director of the Global Financial Literacy Excellence Centre in Washington DC speaks at the seminar 'Building Financial Resilience at Turbulent Times', hosted on 24 March by the European Banking Federation. Professor Lusardi has conducted research on the causes and correlations of financial fragility and wellbeing. In her presentation, she puts her insights in the context of current crisis times. How can families and consumers cope with a financial crisis and how can we together with the private and public sector build a more resilient society? Video Full seminar

EBF response to the Commission consultation on crypto-assets

The European Banking Federation has published its response to the Commission consultation on crypto-assets. The EBF highlights the importance of a level playing field regarding regulatory safeguards for crypto-assets, to be fostered by considerations of a pan-European approach rather than detrimental regulatory fragmentation across different countries. Read more

EBF MEMBERS IN THE NEWS

Germany: Covid-19: Ossig: KfW Quick Loan will help our customers

"It is good that the Federal Government has pragmatically and quickly expanded the KfW Special Programme to deal with the Covid-19 crisis," said Christian Ossig, Managing Director of the Association of German Banks. Read more (DE)

Spain: Banks do not link ICO credits to any other banking product

With regard to the line of guarantees incorporated into Royal Decree-Law 8/2020 of 10 March adopting certain urgent measures in the economic field and for the protection of public health, the conditions of which were approved by an Agreement of the Council of Ministers on 24 March, the entities associated with AEB, CECA and UNACC give instructions to their network of offices to ensure the rigorous application of the content of this agreement. Read more (ES)

Norway: The Covid-19 crisis seen from Bergen and in macro

Finance Lunch has invited Jan Erik Kjerpeseth, CEO of Sparebanken Vest and Kjersti Haugland, chief economist at DNB, to talk about the economic outlook that follows from the Covid-19 crisis. Western Norway faces a dual shock from the Covid-19 pandemic and a collapse in oil prices. There is little optimism to be traced in the macroeconomist's predictions for the Norwegian economy going forward. Read more (NO)

Denmark: Covid-19: Banks well-positioned to support to Danes

Banks' earnings fell slightly in 2019 compared to 2018 - a trend that is expected to continue in 2020. Interest income is squeezed, and on the expenditure side, wage spending on money laundering and compliance increases. Nevertheless, the banks are well equipped to support the Danes during the corona epidemic because large holdings of capital have been built up. It shows the financial statements of 15 of the largest Danish banking and mortgage groups. Read more (DK)

Czech Republic: CBA on the operation of COVID II

Member banks of the Czech Banking Association (CBA) involved in the COVID II program (the so-called Cooperating Banks) often encounter misunderstandings in the context of lending under this program. Read more (CE)

FROM THE INSTITUTIONS

Council: Review of the EU's economic response to the Covid-19

Ahead of today's meeting of the members of the Eurogroup, President of the European Council Charles Michel convened and chaired a videoconference with the Presidents of the European Commission, the ECB and the Eurogroup on Monday afternoon. The presidents reviewed the progress made in the EU's economic response to the Covid-19 crisis. He said: "There is a lot of room for solidarity within the existing instruments and institutions. We have to exploit these tools fully and remain open to doing more. A strong package is in the making. Our goal is clear: we will protect European citizens and businesses from the economic impact of the pandemic." Read more

ECB: ECB's Isabel Schnabel interview with To Vima

The ECB has published an interview with Isabel Schnabel, Member of the Executive Board of the ECB. It covers the ECB’s PEPP and the option of coronabonds. Ms Schnabel states that the PEPP is the right instrument to support the euro area on the monetary policy side. Read more

ESMA report stresses the impact of costs on retail investor benefits

ESMA has published its second annual statistical report on the cost and performance of retail investment products in the EU. For retail alternative investment funds (AIFs), the current report provides information on gross performance, while data on costs continued to be unavailable. Read more

Commission and EIF unlocked €8bn in finance for 100,000 SMEs

The Commission and European Investment Fund has unlocked €8 bn in finance for 100,000 SMEs. This will allow the EIF to issue special guarantees to incentivise banks and other lenders to provide liquidity to at least 100,000 European SMEs and small mid-cap companies hit by the economic impact of the coronavirus pandemic. It is part of the package of measures announced by the EIB Group on 16 March designed to rapidly mobilise support for Europe's SMEs and mid-caps. Read more

Commission: Extention of the Temporary Framework

The proposal enables Member States to accelerate the research, testing and production of coronavirus relevant products, to protect jobs and to further support the economy in the context of the coronavirus outbreak. The amendment Temporary Framework will be in place until the end of December 2020. With a view to ensuring legal certainty, the Commission will assess before that date if it needs to be extended. Read more

BIS: Measures to reflect the impact of Covid-19

The BIS has published its measures to reflect the impact of Covid-19. It sets out technical guidance related to: the exceptional measures introduced by governments and banks to alleviate the impact of Covid-19; and expected credit loss accounting. Read more

Banking in a Digital World: Drivers and Trends

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ABOUT THE EUROPEAN BANKING FEDERATION

The European Banking Federation is the voice of the European banking sector, bringing together national banking associations. The EBF is committed to a thriving European economy that is underpinned by a stable, secure and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.