ECB to Temporarily Ease Eurozone Bank Lending Regulations

Until June Next Year... Excluding Central Bank Cash Holdings in Debt Calculation
Creating Room for Expanded Loans to Individuals and Businesses... Aiming to Prevent Credit Crunch

European Central Bank (ECB) building exterior [Image source=EPA Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The European Central Bank (ECB) has decided to partially ease leverage regulations on banks within the Eurozone, considering the economic impact of the novel coronavirus disease (COVID-19).

According to Bloomberg News and others on the 17th (local time), the ECB announced in a statement that it will partially relax the method of calculating the leverage ratio. The leverage ratio was created to limit debt expansion in order to strengthen the soundness of banks, and the ECB has implemented it since 2008, regulating the ratio at 3%.

Through this measure, the calculation method will be loosened to allow cash and deposits held at central banks to be excluded. If this ratio regulation is eased, banks will have more room to provide loans to individuals and businesses. This measure will be maintained until June next year.

Foreign media expect that this will enable banks to utilize an additional 73 billion euros for lending. As of the end of March, the leverage ratio of Eurozone banks was 5.36%, and the ECB anticipates it will rise to 5.66% through this measure.

The ECB emphasized that "the pandemic and its consequences are affecting the entire European economy in unprecedented and tremendous ways," and that "the bank-based transmission channel of monetary policy must continue to function without disruption."

This content was produced with the assistance of AI translation services.