The current economic crisis is not caused by imbalances in the financial sector. In that respect, this crisis differs from the financial crisis we had more than a decade ago. Governments have taken many relief measures that help to absorb the initial shock. However, the measures also delay the full impact of the economic crisis on banks. For example, for part of their loan books, banks have accepted that payments were temporarily suspended. A large number of customers are able to repay their loans in the end. Banks must therefore focus on timely recognising , and possibly also on adjusting their provisioning policies.
Banks entered this crisis better capitalised
Due to the higher capital requirements imposed in recent years, banks entered the coronavirus crisis better capitalised than the financial crisis of 2008/2009. As a result, this time banks have been better able to continue to support the economy. In addition, policy makers, including DNB, have taken measures in response to the coronavirus outbreak, giving banks more leeway to maintain lending to businesses and households. In addition, banks have responded to the urgent calls of the ECB and DNB not to pay dividends and not to buy back shares in 2020. For all banks under ECB supervision, including the Dutch large banks, this has kept some EUR 27.5 billion of capital in the sector.
Range of measures taken to reduce the impact of the coronavirus crisis
There have also been measures taken impacting loans on bank balance sheets. For example, the government has set up guarantee schemes that reduce banks’ risk on new loans they provide (see also Figure 1a) and banks’ customers have received direct financial support from the government. In addition, banks have issued payment deferrals (also known as moratoria), which temporarily allow customers not to pay interest and/or repayments on their loan. This gave customers time to identify the direct effects of the lockdown on their businesses, without risking being registered as defaulters.