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Assessing the Preliminary Impact of COVID-19 on the EU Banking Sector

On 2 July 2020, the Florence School of Banking and Finance organised an online debate to discuss the state of the EU banking sector in COVID-19 times, on the basis of the preliminary assessment performed so far.

The event opened with a presentation by Mario Quagliariello (Director, Economic Analysis and Statistics, European Banking Authority) who outlined the state of health of the EU banking sector during the first phase of the crisis. In his presentation, he higlighted particularly that, generally, banks have entered this crisis with stronger capital and liquidity positions than in the past, thanks to reforms undertaken after the 2008 crisis. Similarly, regulators and supervisors have acted quickly to provide capital, liquidity and operational relief. However, in the coming months asset quality is expected to deteriorate. This will affect negatively banks, but the extent of this negative impact will depend on each bank’s starting capital levels, or its exposure to the sectors more affected by the crisis. Finally, he highlighted the fact that the long term challenges for the banking sector (such as low profitability, required transformation of business models, and the need to restructure capacity) remain a worrying factor, particularly since COVID-19 is likely to exacerbate them even more.

The presentation was followed by comments by Véronique Ormezzano (Head of Group Prudential Affairs for BNP Paribas), Til Schuermann (Partner and Co-Head of Oliver Wyman’s Risk & Public Policy practice in the Americas) and Nicolas Véron (Senior Fellow, Peterson Institute for International Economics and Bruegel) who shared their perspectives on the current state of the banking sector and the challenges ahead. The concluding debate, chaired by Elena Carletti (Bocconi University and Florence School of Banking and Finance, EUI) discussed the short, medium and long term prospective for the banking sector, with a particular attention to the policy implications of the COVID-19 crisis.

Download the presentations here