Banks vs Covid-19: whatever it takes
Banks are going to play an outsized role in softening the economic impact of Covid-19 in the euro area.
There is no getting away from the fact that the EU economy is built on the back of bank lending.
Despite efforts to develop alternative forms of funding and create a powerful Capital Markets Union, it is still the traditional banks that finance most of the growth in the euro area.
European companies counted on the sector for a staggering 88% of their new funding in 2018, according to the Association for Financial Markets in Europe.
With Covid-19 beginning to dent business activity, it is inevitable that banks will be forming the front line in the economic fightback against the crisis.
Some of them have already started to step up to the mark. UniCredit, for example, is supporting affected companies by implementing a 12 month moratorium on their mortgage repayments.
But many other lenders have yet to make a peep.
Anyone expecting the European Central Bank to come to the rescue next week will likely be disappointed. Though the ECB is expected to announce some new measures, it is already pushing against the limits of what it can achieve through loose monetary policy.
Governments might be able to play a bigger role in protecting the European economy, but their assistance is subject to political constraints and cannot be counted upon.
Euro area companies have relied heavily on the support of bank funding in the good times. With Covid-19 souring the economic outlook, they may start to need that support more than ever.
It is only right that banks are proactive in supporting their clients: it is their turn to do whatever it takes.