Moneycontrol PRO
UPCOMING EVENT:Watch leaders discuss the biggest issue of our times at the Sustainability 100+ Summit. Register now!
you are here: HomeNewsWorld

Euro zone corporate vulnerability at levels seen in debt crisis: ECB

“Corporate vulnerabilities have increased to levels last observed at the peak of the euro area sovereign debt crisis, but remain below levels reached in the aftermath of the global financial crisis,” the ECB said a stability report article.

November 23, 2020 / 05:10 PM IST

Euro zone firms are increasingly vulnerable amid a pandemic-induced recession but public support, including cheap cash from the European Central Bank, have limited the damage so far, a new ECB report showed on Monday.


“Corporate vulnerabilities have increased to levels last observed at the peak of the euro area sovereign debt crisis, but remain below levels reached in the aftermath of the global financial crisis,” the ECB said a stability report article.


For a graphic on Euro zone: policy support has kept companies afloat:


ECB insolvencies during COVID 19


Having bought over 20 billion euros worth of corporate debt this year in an emergency bond purchase scheme, the ECB has been a cornerstone in providing funding to companies.


But the new downturn could lead to rating downgrades, which could make it harder for the ECB to chip in as it can only buy investment-grade corporate debt.


The unresolved issues for companies are falling sales, lower actual and expected profitability, and an increase in leverage and indebtedness, the ECB added.

“Government loan guarantees and bankruptcy moratoria have prevented a large-scale wave of ... defaults, but a sizeable number of firms could be forced to file for bankruptcy if these measures are lifted too early or bank lending conditions tighten,” the ECB said.

Reuters
first published: Nov 23, 2020 05:10 pm

stay updated

Get Daily News on your Browser
Sections
ISO 27001 - BSI Assurance Mark