The corona-crisis presents banks with some painful dilemmas, and may also ravage their bottom lines
to Gru in “Despicable Me”, the villain redeemed is a time-honoured trope in fiction. There has been much talk lately of bankers enjoying a similar rehabilitation. Reckless overextension by lenders was the root cause of the financial crisis of 2007-09. This time the blame lies with a microbe, not moneymen, and banks are seen as potentially part of the solution, not least as conduits for massive state support for stricken firms and households.
At the same time, regulators in Europe in particular have nudged or ordered banks to bolster their defences by freezing payouts to shareholders and star performers. British banks, for instance, are withholding £8bn-worth of dividends. American ones have not followed suit, though they have suspended share buy-backs. Bonuses are in regulators’ cross-hairs too: Andrea Enria, the European Central Bank’s top bank supervisor, has called for “extreme moderation”.
Europe is in worse shape. A senior banker says the outlook for British lenders is “really shitty”. He fears some smaller banks and non-bank providers may not survive. Italian lenders, battered by the euro-crisis, were on the mend until covid-19, having cut their bad loans in half, but now look precarious again. Deutsche Bank, which has been struggling to get back to good health for years, risks a relapse.
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