Many eurozone banks underestimate credit losses they are likely to incur from the Covid-19 pandemic and supervisors will focus on asset quality this year, European Central Bank Governing Council member Yannis Stournaras said on Friday.
“There is a widespread view that many banks in the euro area underestimate their credit losses due to the pandemic, especially for the performing customers that are currently benefiting from payment deferrals,” he told a banking forum.
Stournaras, who is the governor of Greece’s central bank, said the asset quality of European lenders would be at the epicenter of supervisory action this year.
Despite a projected economic recovery in 2021, risks remain elevated, he said.
“The resurgence of the pandemic and the new round of restrictive measures across Europe could lead to a longer and deeper recession, associated with a wave of corporate defaults, rising nonperforming loans and job losses,” Stournaras warned.