ECB’s Elderson: Some Normality Hopefully to Return Soon Thanks to Vaccines
25 January 2021
By David Barwick – FRANKFURT (Econostream) – A degree of normality will hopefully return soon thanks to the vaccination of the public against Covid-19, European Central Bank Executive Board member Frank Elderson said on Monday.
In his introductory statement at a hearing before the Committee on Economic and Monetary Affairs of the European Parliament, the text of which was posted to the ECB’s website, Elderson said that as the ripples from the pandemic-related crisis spread further, the repayment of bank loans may increasingly suffer.
‘While challenges abound, hopes are rising that brighter times finally lie ahead for all of us’, he said. ‘Vaccination campaigns have begun all over Europe, and soon we will hopefully resume some normality.’
At the hearing, whose purpose was to evaluate Elderson’s suitability for the role of Vice Chair of the Supervisory Board of the ECB, he said that ‘[t]he impact of the crisis on the European banking sector has yet to be fully revealed’, even if supervisory measures taken during the crisis had reinforced the system.
‘But as the economic shock materialises further, businesses and consumers may find it more difficult to repay their loans’, he said. Banks cannot be left to accumulate NPLs, he said, but must rather be made to address this problem as it emerges.
In this context, Elderson hailed the EU Commission’s NPL action plan as a ‘commendable’ supplement to ECB Banking Supervision. (The four main goals of the recently introduced plan include further developing secondary markets for distressed assets; reforming corporate insolvency and debt recovery legislation; establishing collaborative network of national asset management companies; and implementing precautionary public support measures to safeguard the continued funding of the real economy.)
‘But there are other challenges on the horizon, too’, he added, citing weak banking profits caused by low interest rates, excess capacity and sluggish digitalisation. Moreover, ‘we still need to deal with the consequences of Brexit’, he said.
In other comments, Elderson urged completion of banking union and, as a prerequisite of this, the establishment of a European deposit insurance scheme.