JUDGING by its largest banks, you’d hardly know Europe was in the grip of a worsening pandemic.

Ten of the biggest banks in the region set aside in the third quarter the least amount of money for doubtful loans since the onset of the coronavirus — at a combined US$7.2 billion, it’s a fifth of the US$36.7 billion provisioned in the first half. At the same time, banks including Spain’s Banco Santander SA are touting financial strength to lobby regulators to restart dividends while the likes of Deutsche Bank AG are making a case for bigger bonuses for bond traders who raked in bumper revenue.

The tone struck by Europe’s lenders is in stark contrast with a deteriorating backdrop of new infections and restrictions that threatens to bring more economic pain. Coming at a time when taxpayer money is being used to soften the impact of lockdowns that could bankrupt companies and throw millions out of jobs, the dissonance risks putting bankers on a collision course with regulators.

“We’re in a very negative situation full of uncertainty and now is not the time to lift the dividend ban,” said Antonella Sciarrone Alibrandi, a professor at the School of Banking, Finance and Insurance at the Università Cattolica del Sacro Cuore in Milan.

Like their European counterparts, the top 10 U.S. banks lowered combined provisions for bad loans to US$6.5 billion in the quarter from US$76.3 billion in the first half. While lenders say they have adequate cover, investors aren’t piling in. Financial stocks on both sides of the pond remain laggards this year. Banks are the worst-hit sector in Europe, after energy.

After their greed was blamed for the 2008 credit crunch, bankers sought to be part of the solution during the pandemic by lending to paralyzed companies, rather than focusing solely on returns. Lenders were given unprecedented regulatory relief, with measures freeing up capital to absorb losses or fund loans.

“Credit risk is the top priority right now,” said Andrea Enria, the ECB’s top banking watchdog.(SD-Agencies)