Austrian Lenders can Cope with 2021s Wave of Insolvencies

Austria’s financial sector is in a robust state and should be able to cope with the strain of rising company insolvencies next year when coronavirus-related aid measures that have kept many firms afloat expire, its central bank said on Wednesday.

In its half-yearly Financial Stability Report, the Austrian National Bank (ONB) said the Alpine country’s lenders had stepped up risk provisioning in the first half of this year to prepare for the difficulties to come, and stress tests showed the banking sector had enough risk-bearing capacity.

“The Austrian financial sector is currently in a robust state, and this is one of the reasons why – from today’s point of view – it can be expected to effectively cope with the risks to financial stability once the support measures expire,” the ONB said in a statement summarising the report’s findings.

“Still, the quality of banks’ loan portfolios is bound to worsen markedly given the increase in insolvencies anticipated for 2021,” it added, recommending that banks “apply sustainable lending standards, in particular in real estate lending”.

(Reporting by Francois Murphy Editing by Robert Birsel)

Source: Reuters

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