This ECB press release lists four initiatives to deal with impact of Covid 19
- ECB gives banks further flexibility in prudential treatment of loans backed by public support measures
- ECB encourages banks to avoid excessive procyclical effects when applying the IFRS 9 international accounting standard
- ECB activates capital and operational relief measures announced on March 12, 2020
- Capital relief amounts to €120 billion and could be used to absorb losses or potentially finance up to €1.8 trillion of lending
This guidance on flexibility is helpful (arguably necessary) but it would have been better if the relationship between loan loss provisioning and capital buffers was more clearly thought through and built into the design of the system before it was subject to its first real test.