Healthy businesses facing liquidity squeeze set for lift

Τhe central bank's main goal is to prevent one of the biggest risks posed by the new turmoil to the global economy from the coronavirus epidemic: to find and healthy and sustainable businesses suffering liquidity problems, that may otherwise reduce their operations, or even shut down, due to the deteriorating conditions.

Bank of Greece governor Yannis Stournaras will discuss with the heads of the country's lenders on Friday liquidity measures to help boost the economy, based on this week's decisions from the European Central Bank (ECB ) and the European Banking Authority (EBA).

The meeting will be done via conference call, even though all parties are located in Athens, as businesses call for financial assistance from banks and the government due to the coronavirus that has pulled the brake on the economy and imported problems, such as a decision by Germany's TUI to freeze bookings and payments to tour operators.

According to sources, the central bank's main goal is to prevent one of the biggest risks posed by the new turmoil to the global economy from the coronavirus epidemic: to find and healthy and sustainable businesses suffering liquidity problems, that may otherwise reduce their operations, or even shut down, due to the deteriorating conditions.

In the conference call, Stournaras is expected to help guide lenders on how they can take advantage of the two important tools being offered by the ECB and EBA:

On the one hand, there are the additional Targeted Longer-Term Refinancing Operations (TLTRO), with favorable rates for the provision of liquidity from the ECB. On the other hand, the EBA has accepted a request from European banks to be more flexible on rules regarding non-performing loans and the way provisions are taken, in cases where loans to healthy and viable companies with temporary liquidity problems are being refinanced. In addition to supporting the real economy, this decision aims at avoiding the creation of a new generation of bad loans that would put more pressure on bank balance sheets.

It is worth noting that decisions were also made yesterday on another important issue for banks - the protection of main residencies and Greece's new insolvency laws. The government decided to extend slightly current regulations allowing for protection against bank foreclosures. This was done to avoid upcoming changes to the law from coinciding with the turmoil caused by the coronavirus epidemic. The eurogroup will have the final say on this issue.

Other changes made recently by European bank regulators that are of key importance to Greek lenders include a decision to pushback stress tests scheduled for 2020 and increased flexibility being offered on the way banks measure capital adequacy as a means of reducing pressure to raise extra funds during this period of uncertainty.

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