Coronavirus shock to hit diversified lenders hardest – ECB

European lenders with mixed portfolios would see their risk-based capital ratios fall furthest under a prolonged pandemic-induced recession, a new stress test by the European Central Bank (ECB) shows.

Out of the 86 banks subjected to a severe Covid-19 scenario, 31 classified as ‘diversified lenders’ would see their weighted average Common Equity Tier 1 (CET1) capital ratio drop 7 percentage points over the three-year test horizon. This compares to an overall average of 5.4pp.

The 17 defined as

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