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The biggest beneficiary of global banking regulators’ decision to delay the implementation of the final Basel III capital rules will be European banks, says Fitch Ratings.

In a new report, the rating agency said that the Basel Committee on Banking Supervision’s move to delay the final Basel III rules by a year (to January 2023) gives banks and regulators some additional room to respond to the economic effects of the Covid-19 outbreak.

“It will ease the capital constraints that some banks might have faced and it will be particularly helpful for the larger EU banks,” Fitch said.

A number of European banks faced added capital requirements due to the final rules, whereas the large U.S. and other global banks “typically faced only a small increase, or even a fall in capital requirements,” Fitch said.

While the pressure to add capital is reduced in the short term, Fitch said that it’s not clear that Europe’s banks will be well positioned for Basel III even with the one-year delay.

“Banks’ profitability was already low before the coronavirus crisis, and a prolonged period of near-zero policy rates and the likelihood of higher loan impairment charges could weaken it further,” Fitch said.

Nevertheless, the rating agency also said that the regulators’ decision “appears sensible given the impact of the economic shock on banks’ operations and financial metrics.”

At the same time, the move also delays regulators’ efforts to reduce banks’ use of internal models, and the push to level the playing field between the larger, better-capitalized banks, and smaller, less sophisticated banks.

It also delays the effort to enhance the comparability of banks’ risk-based ratios for investors.