FRANKFURT (Reuters) - European Central Bank supervisors are looking at relaxing rules further for euro zone banks hit by the coronavirus outbreak, exploiting wiggle room in the application of new accounting standards, a source told Reuters.
ECB Banking supervision, which only last week decided it would let banks eat into their capital buffers to cope with the pandemic, is now looking at fresh measures as the odds on a severe recession in the euro zone shorten and bank shares plummet.
Specifically, they are considering using some flexibility in the way they apply accounting standards known as IFRS 9, which since 2018 demand that banks partly provision for a loan upfront in expectation of losses in its first year.
In addition, the watchdogs are looking at revising their guidance on unpaid credit, which among other things gives banks three years to set aside cash against a bad loan if it is unsecured, nine years if it is backed by real estate, and seven years for other types of collateral.
An announcement is expected in the coming days, the source added.
An ECB spokeswoman declined to comment.
Reporting By Francesco Canepa; Editing by Gareth Jones