European banks recommended that “belt-tightening”

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The European Central Bank (ECB) has recommended to the Eurozone banks to “tighten their belts”, that is, not to pay dividends until January 2021 because of the crisis caused by the pandemic coronavirus. Economists have warned of serious difficulties for monetary organizations, writes CNBC.

The ECB has published a study of 86 banks. Organizations are subjected to stress testing under two scenarios: a reduction in GDP in 2020 of 8.7 and 12.6 percent. Under the first scenario, the solvency ratio of banks declined by 1.9 percentage points, while the second — by 5.7 percentage points.

“The banking sector is quite strong and can withstand the unprecedented shock”, — said the Chairman of the Supervisory Board of the ECB, Andrea Enria. However, he warned that if the crisis intensified, some banks “will face difficulties and will not be able to meet the minimum requirements”.

Eurozone banks are often priced on the basis of their geographical location, while creditors in the southern countries is associated with increased risk. The ECB demanded that all “extreme moderation” for payment of remuneration to the shareholders. The European banking sector fell by about 33 percent since the beginning of the year.

July 21, EU leaders agreed on a bailout plan, Europe’s 750 billion Euro after days of negotiations. Business activity in the Eurozone in July 2020 has recovered at the fastest pace in two years.

Video, photo All from Russia.

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