This is especially refreshing to someone like me coming from a Calvinist country where the word for debt – schuld – is the same as the word for guilt. But still, we are talking about a situation where someone may not pay back your loan. For a bank, that's potentially life-threatening, because it can erode your capital.
Since the beginning of the Covid crisis, European banks haven't pulled up their drawbridges, but instead continued lending to firms and households. At the same time, they increased provisions, in expectation of a surge in non-performing loans. But so far, the impact of Covid on asset quality was not as bad as expected.