Most European Banks' Moratoria Are Coming To An End; Asset Quality Impact Yet to be Seen

DBRS Morningstar has published a commentary analysing moratoria usage in the European banking sector. The analysis is based on data reported at end-June 2021 by a sample of 35 banks in Europe, including banks headquartered in France, Germany, Italy, the Netherlands, Spain, Sweden, Portugal, Finland, Ireland, and the United Kingdom (UK).

Total loans with moratoria granted (including both outstanding and expired) have remained at similar levels to a year ago as of end-H1 2021 based on DBRS Morningstar's sample of European banks. On the other hand, State Guaranteed Loans granted by European banks have shown significant growth since end-H1 2020.

The commentary also analyses the impact of payment holidays on the 272 Structured Finance transactions rated by DBRS Morningstar, across 8 jurisdictions. Italy, UK and Portugal have been the jurisdictions with the higher number of reported payment moratoriums in their portfolios.

“Moratoria and state guarantees loans have been important measures to support economies through the pandemic and prevent the escalation of asset quality problems at European banks to date. However, Most loan moratoria are reaching their expiry date, or have already and we consider the full consequences of the removal of moratoria and other support measures are yet to be seen on banks' balance sheet” Said Maria Rivas , Senior Vice President, Global Financial Institutions at DBRS Morningstar.