Uncertainty is certain in today’s global credit markets
Global Credit Markets have felt the impact of the Covid-19 pandemic since it began. Government support and forbearance schemes have supported global credit markets in what has been a tough time for both lenders and borrowers. The extent of the support given has varied from country to country, placing banks in different stages of the recovery process.
Despite the negative economic impact due to the pandemic, EU banks have been able to maintain both overall stability and control the growth of the Non-Performing Exposure stock. This is partly due to the significant support measures implemented by governments, such as moratoria and state guarantees. In fact, over EUR 900 bn of European loans have received support through European Banking Authority (EBA) eligible moratoria. Therefore, the impacts of the Covid-19 crisis will be to some extent delayed in the NPL sector. The combined effect of this and a deterioration of asset quality on bank’s balance sheets is expected to materialise in 2022. The impact of the crisis is expected to be asymmetrical on different countries due to the variation in government response.