No wonder investors struggled to believe the upbeat tone in European banks’ third-quarter 2020 results.
Given how much banks reduced and even wrote back provisions, you might have thought Covid-19 was over. Instead, the continent was just entering a second wave of infections and lockdowns, and the main vaccine test results had not even been made public.
Under the new accounting frameworks designed to prevent a recurrence of the 2008 crisis, banks are supposed to hike loan-loss provisions when they see risks increasing.
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