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Jonas Wendelborn

25 May 2020
FINANCIAL STABILITY REVIEW - BOX
Financial Stability Review Issue 1, 2020
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Abstract
On 27 March, ECB Banking Supervision recommended that banks refrain from paying out dividends and buying back shares until 1 October 2020, following earlier announcements of temporary capital and operational relief measures. All national authorities in the euro area had made similar requests to banks under their direct supervision. In recent years, euro area banks have increased dividend payouts and share buybacks. Had this continued under the current circumstances, it may have weakened the ability of banks to use retained earnings to absorb losses and support lending to the real economy. This box reviews patterns in global banks’ payouts to shareholders and the contribution that lower payouts may make towards improving bank resilience.
23 November 2020
FINANCIAL STABILITY REVIEW - BOX
Financial Stability Review Issue 2, 2020
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Abstract
The coronavirus pandemic has threatened the existence of many euro area firms. While liquidity shortages were seen as the major threat to corporate health at the beginning of the pandemic, more recently firms’ solvency has become the primary concern. Against this backdrop, this box assesses euro area corporate vulnerabilities and the underlying factors. It develops a new composite indicator that allows analysis of the time-varying impact and the relative importance of the factors driving corporate financial soundness and risk. Using aggregate sectoral accounts data, this measure combines indicators along five dimensions: debt service capacity, leverage/indebtedness, financing/rollover, profitability and activity. According to the composite indicator, corporate vulnerabilities have increased to levels last observed at the peak of the euro area sovereign debt crisis and are largely driven by a drop in sales, lower actual and expected profitability, and an increase in leverage and indebtedness. However, extensive monetary, fiscal and prudential policy measures have limited the increase in corporate vulnerability, primarily by ensuring favourable funding conditions. So far, government loan guarantees and bankruptcy moratoria have also prevented a large wave of corporate defaults, but a sizeable number of firms could be forced to file for bankruptcy if these measures are lifted too early or bank lending conditions tighten.
JEL Code
E6 : Macroeconomics and Monetary Economics→Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
G3 : Financial Economics→Corporate Finance and Governance
18 May 2021
FINANCIAL STABILITY REVIEW - ARTICLE
Financial Stability Review Issue 1, 2021
Details
Abstract
Policy measures aimed at supporting corporates and the economy through the coronavirus pandemic may have supported not just otherwise viable firms, but also unprofitable but still operating firms – often referred to as “zombies”. This has in turn raised questions about an increased risk of zombification in the euro area economy, which could constrain the post-pandemic recovery. Firm-level, loan-level and supervisory data for euro area companies suggest that zombie firms may have temporarily benefited from loan schemes and accommodative credit conditions – but likely only to a modest degree. These firms may face tighter eligibility criteria for schemes and more recognition of credit risk in debt and loan pricing in the future. Tackling the risk of zombification more fundamentally requires the consideration of suggested reforms to insolvency frameworks and better infrastructure for banks to manage non-performing loans.
JEL Code
E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation
L25 : Industrial Organization→Firm Objectives, Organization, and Behavior→Firm Performance: Size, Diversification, and Scope