Capital cliff effect awaits EU banks as Covid support wanes
CET1 ratios have benefited from state intervention, but could drop sharply as measures expire
State support of bank capital ratios in response to the Covid crisis will peak in early 2021 before falling off sharply, European Central Bank data shows. The phase-out of relief measures could create cliff effects, eroding the capitalisation of EU banks in countries struggling to recover from the pandemic, the central bank warned.
Had fiscal, monetary and regulatory authorities not taken action to shore up the banking system when the pandemic hit, the average Common Equity Tier 1 (CET1) ratio
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