The European Central Bank (ECB) has stated it sees ‘no need’ to allow banks to exclude central bank exposures from their leverage ratios beyond March this year.
The bank also stated it doesn’t see the need to allow banks to operate below the level of capital defined by its Pillar 2 guidance beyond December this year.
Back in March 2020, the ECB enabled banks to operate below the level of capital defined by the Pillar 2 guidance and the capital conservation buffer. In July the same year, the ECB committed to maintaining the full buffer
In March 2020 the ECB allowed banks to operate below the level of capital defined by the Pillar 2 Guidance and the capital conservation buffer. In July 2020 the ECB committed to maintaining this full buffer flexibility until at least the end of 2022.
Back in September 2020, the ECB allowed banks to exclude certain central bank exposures from the denominators of their leverage ratios owing the macroeconomic circumstances of the pandemic. In June 2021, the ECB extended that measure until March this year.
ECB supervisory board chair Andrea Enria said, “The capital space that we created for banks at the onset of the pandemic helped them to continue lending to households and businesses. Today we are providing clarity on the path back to normality. We are confirming the initially envisaged timeline for a return to normal supervision of banks’ capital adequacy and leverage.”
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