ECB Relaxes Bank Leverage Regulation In Attempt to Boost Economy

The European Central Bank has relaxed regulations on eurozone banks, freeing up as much as €73bn of capital in an attempt to boost lending and prevent the economic crisis triggered by the coronavirus pandemic from turning into a credit crunch, the Financial Times reported. The move announced by the ECB on Thursday grants lenders extra capital relief, enabling them to increase their lending to governments, businesses and households. It follows a similar, albeit more generous, move by the US Federal Reserve in April. The leverage ratio rule — which regulates the amount of capital banks hold in relation to their assets — was introduced after the 2008 financial crisis in an attempt to prevent banks from operating with excessively indebted balance sheets. It requires eurozone lenders to have capital equal to at least 3 per cent of their total assets by next June. Read more

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