Pandemic continues to cast a shadow over the outlook for European banks’ credit risks

Abstract

The COVID-19 pandemic has led to an increase in the credit risk faced by European banks. Although the pandemic’s negative impact on the economy has been eased thanks to various support measures, there is still much uncertainty attached to how the crisis will play out. Banks in general are showing stronger resilience to risk than they did in previous crises. The state of the banking sector will be assessed in spring 2021 by means of stress tests. If the stock of non-performing loans increases, it could be difficult for banks to continue supplying credit to the real economy. The European Commission has proposed an action plan to reduce the number of non-performing loans.