March 26 (UPI) — Banks in the eurozone appear to have enough cash on hand to survive the COVID-19 pandemic, the International Monetary Fund said Friday in a new economic forecast.
The IMF created the outlook to examine the impact of the coronavirus crisis on the European financial sector. Officials said it’s based on January projections and information from banks in the eurozone — 19 countries in the European Union that use the euro as their main currency.
“Although the impact of the crisis on banks has been limited so far, our analysis suggests that capital pressures will rise during the protracted recovery,” the report said.
“Banks have been able to slowly absorb rising impairments without a significant change in their capital.”
The report said, however, that fiscal vulnerabilities might still emerge as the pandemic goes on and emergency measures put in place last year expire.
“A more sluggish recovery than projected in the baseline could lead to potentially larger bank credit losses,” the IMF report added. “Especially if a premature phaseout of supportive policy measures creates ‘cliff effects.'”
Eurozone banks remain “heavily exposed” to certain economic sectors heavily affected by the pandemic, such as accommodation and food services, real estate and retail trade, the analysis said.