ECB eases bank risk capital requirements to calm markets

BERLIN, Germany – The European Central Bank (ECB) said on Thursday, April 16, it would temporarily lower its requirements on how much capital banks have to set aside to deal with market risk, in a bid to calm markets roiled by the coronavirus pandemic.

“With this decision, the ECB is responding to the extraordinary levels of volatility recorded in financial markets since the outbreak of the coronavirus,” said the central bank for the single currency zone in a statement.

The ECB said it would review its decision to reduce a supervisory measure for banks – called the qualitative market risk multiplier – after 6 months.

Thursday’s move is the latest in a series of measures unleashed by the ECB to help the single currency zone cope with the economic backlash of the coronavirus pandemic.

Last week, the bank announced an “unprecedented” easing of collateral requirements to boost bank lending. 

The Frankfurt-institution last month unveiled a “big bazooka” with its 750-billion-euro bond-buying scheme to encourage spending and investment in the region.

It came on top of an earlier pledge to spend an extra 120 billion euros on asset purchases this year, as well as keeping up the current pace of hoovering up 20 billion euros a month in government and corporate bonds.

The ECB has also announced a fresh round of ultra-cheap loans to banks and more generous terms to entice lenders to grant loans to small businesses, seen as particularly vulnerable in the current upheaval. – Rappler.com