MNI POLICY: ECB Relaxes Bank Capital and Operational Limits

By Luke Heighton

     FRANKFURT (MNI) - The ECB's Banking Supervision arm said Thursday it would

allow banks to fully use capital and liquidity buffers to support their real

economy funding operations in the face of an expected economic crisis caused by

the coronavirus, and will consider the implementation of operational flexibility

supervisory measures on a "bank specific" basis.

     "The coronavirus is proving to be a significant shock to our economies.

Banks need to be in a position to continue financing households and corporates

experiencing temporary difficulties. The supervisory measures agreed today aim

to support banks in serving the economy and addressing operational challenges,

including the pressure on their staff," Andrea Enria, Chair of the ECB

Supervisory Board, said.

     Here are the key points from the decision:

     - Banks can operate temporarily below the level of capital defined by

Pillar 2 Guidance, the capital conservation buffer and the liquidity coverage

ratio.

     - These measures will be enhanced by the appropriate relaxation of the

countercyclical capital buffer by the national macroprudential authorities.

     - Banks will be allowed to partially use capital instruments that do not

qualify as Common Equity Tier 1 capital, for example Additional Tier 1 or Tier 2

instruments, to meet the Pillar 2 Requirements.

     - The ECB is discussing with banks such individual measures as rescheduling

on-site inspections and extending deadlines for the implementation of

remediation actions stemming from recent on-site inspections and internal model

investigations.

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

[TOPICS: M$X$$$]