ECB says will not extend capital and leverage relief for banks

• ECB requires banks to hold marginally more capital in 2022
• Says SREP results show banks have solid capital and liquidity Liquidity Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange marke Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market.This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Liquidity in the FX MarketTake the example of the foreign exchange marke Read this Term positions, with scores broadly stable
• Overall capital requirements and guidance increase marginally to stand at 15.1% of risk-weighed assets in 2022
• That is up from 14.9% in 2021
• But assessment of business models show that most banks are still failing to generate returns that exceed cost of capital

On the change, the ECB notes that:

"The capital space that we created for banks at the onset of the pandemic helped them to continue lending to households and businesses. Today we are providing clarity on the path back to normality. We are confirming the initially envisaged timeline for a return to normal supervision of banks’ capital adequacy and leverage."

The full release can be found here.