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Europe calls on banks to show heart and support households and businesses

Greece’s Finance Minister Christos Staikouras

Greece’s Finance Minister Christos Staikouras on Thursday joined his European counterparts at the recent ECOFIN meeting, in calling banks to continue supporting households and businesses.

In their statement, the EU Finance Ministers said it was “crucial that banks continue financing households and corporates, including SMEs experiencing temporary difficulties amid the COVID-19 pandemic,” they said. To this end, “making full use of the flexibility provided for in the prudential and accounting framework, is essential” at a time when sufficient financing to cover financial pressures is vital for the economy.

Additionally, the EU Finance Ministers welcomed the position of the  European Commission, the European Central Bank, the Single Resolution Board, the European Banking Authority and the European Securities Markets Authority on the application of regulatory and accounting requirements for financial institutions in the current exceptional circumstances.

“We stress the importance that all authorities continue to take an ambitious and coordinated approach when further specifying how to make best use of the available flexibility,” they said, to ensure that the various initiatives announced by EU member states and financial institutions are taken into account “and that there is a level playing field” among the countries.

The ECOFIN ministers urged that “all banks that have not already decided to do so to refrain from making distributions during this period.” The purpose, they said would be to “use the freed capital and available profits to extend credit or other urgent financing needs arising from the ongoing crisis to their customers in a way that helps to ensure preserving economic activity.”

“We call on the banking sector to support households and corporates affected by the COVID-19 outbreak, with the aim of ensuring business continuity,” they stressed.

The ministers also welcomed statements and a recommendation by the European Insurance and Occupational Pensions Authority on the identification of a number of tools allowing for flexibility and urged insurance companies to “take timely and comprehensive measures to preserve their capital position, including the temporary suspension of all discretionary distributions, and to continue to act in the best interests of consumers.”

They also welcomed supervisory flexibility expressed by European supervisory authorities regarding deadlines of supervisory reporting and public disclosure, and said they would continue to closely monitor the situation and to coordinate European and national measures.

“Where necessary, we stand ready to take further actions, including legislative measures if appropriate, to mitigate the impact of COVID-19,” they concluded.

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