Weak EU banks may lowball Covid loan losses – ECB

Low-profitability banks provision less than their more flush counterparts

Low-profitability lenders in the eurozone may not be putting enough income aside to cover loan defaults triggered by the coronavirus crisis, the European Central Bank (ECB) has said.

In its biannual Financial Stability Review, the agency showed that those banks which entered the crisis struggling to turn a profit took a lower level of loan-loss provisions than those rolling in cash. The median bank in the bottom quartile for profitability took provisions equal in size to 0.32% of their total