Germany to let banks tap capital buffer

Bloomberg

Germany’s financial watchdogs eliminated a key capital requirement for the country’s banks to keep credit flowing to an economy that’s approaching a standstill as the coronavirus spreads.
The countercylical capital buffer, meant to strengthen banks in good times for a downturn, will be cut to 0% starting on April 1 and remain there until at least through December, the Finance Ministry said in a joint statement with financial supervisor BaFin and the Bundesbank. As a result, banks will be able to release more than 5 billion euros of capital they were in the process of building up.
After more than a decade of tightening financial strength requirements, bank regulators around the world are loosening the reins to help to prevent the economy from seizing up. The task for banks is daunting as many corporate clients are at risk of defaulting on loans while others will probably require additional funds as supply chains are disrupted, stores and restaurants shut down and public life grinds to a halt.
German banks are well capitalised on the whole and the industry isn’t showing liquidity bottlenecks, according to the statement.
The ministry met BaFin as well as Germany’s central bank last week to discuss eliminating the buffer, Bloomberg reported at the time.