The European Central Bank (ECB) said it will let key pieces of regulatory relief expire as watchdogs across the region tighten the reins after lenders weathered the worst of the pandemic, according to Bloomberg.
“Starting next year, lenders will no longer be allowed to dip into non-binding capital buffers and a more favorable calculation will expire at the end of next month,” the ECB said in a statement on Thursday in Frankfurt.
European authorities are raising the bar for banks’ financial strength as their focus turns from maintaining the supply of credit in the pandemic to dealing with risks that have built up. While there’s still some uncertainty regarding the pandemic, the region’s lenders have “ample headroom” above their capital and leverage ratio requirements, the ECB said.
“The capital space that we created for banks at the onset of the pandemic helped them to continue lending to households and businesses,” Andrea Enria, said who leads the ECB’s supervisory board. “Today we are providing clarity on the path back to normality.”
The ECB said it will require banks to hold “marginally more” capital this year. Authorities in France, Germany and Ireland have also reactivated requirements that banks hold extra capital to help them cope with a downturn in the economy.