The European Commission assured on Monday 20 April that it was not working on the creation of a European bad bank, which would allow euro area banks to free themselves of their doubtful bank loans as part of its economic response to the COVID-19 pandemic.
“I can confirm there is no work underway on this within the European Commission”, said Daniel Ferrie, a spokesperson for the institution.
The existence of discussions between senior officials of the European Central Bank (ECB) and the European Commission on this subject was revealed the day before by the Financial Times. According to the newspaper, the monetary institute, fearing a new wave of non-performing loans due to the COVID-19 crisis, would push for such a plan, while Commission officials would be rather reluctant.
After the financial crisis of 2008, several countries, such as Spain, Ireland and Germany, set up bad bank structures of this type in response to the increase in doubtful bank loans.
The Commission recognises that this is a valuable tool at national level. In March 2018, it published a detailed, non-binding plan to help Member States that wished to set up bad banks in full compliance with European regulations (see EUROPE 11981/13).
Nevertheless, at the European level and in the current crisis, it has prioritised other measures to contain the increase in doubtful bank loans, such as the temporary framework on State Aid (see EUROPE 12450/7) or by allowing “greater flexibility” for the use of European funds.
For the time being, the Commission therefore assures that the range of tools at its disposal is sufficient. But, if the need arose to supplement it, the institution would not hesitate to explore “all possibilities”, Daniel Ferrie said. (Original version in French by Marion Fontana)