Brussels, 13/05/2014 (Agence Europe) - French national Danièle Nouy, chair of the bank supervisory board at the European Central Bank, has given facts and figures about the Asset Quality Review currently being carried out by the ECB and the European Banking Authority (EBA)'s bank stress tests.
At a conference organised by the Austrian Central Bank in Vienna on Monday 12 May, Nouy said she would give a few figures to illustrate the extent and exhaustive nature of the AQR, pointing out that some 760 lending portfolios of 128 banks had been selected for assessment, in other words, €3.72 billion in risk-weighted assets, 58% of all risk-weighted assets held by the banks, will be examined. This will require some 135,000 loan files to be studied.
The AQR will be completed by the end of July, when the EBA will carry out bank stress tests using stricter criteria than for the previous stress tests. The starting point will be that banks must hold 8% of CET1 high-quality own funds, which must remain at 5.5% or above even in the adverse scenario of a 2.2% recession in 2014, 5.6% recession in 2015 and 7% in 2017.
The results of this unprecedented assessment, upon which the credibility of the ECB is at stake, will be revealed in October, shortly before the ECB becomes the eurozone's bank supervisor under the bank supervision mechanism (SSM) that comes on stream in November.
Banks approve of the assessments, pointing out that the ECB has responded positively to fears expressed by banks about the quality of information required. The financial industry says that European banks are currently correcting problems with their balance sheets ahead of the tests in order to sail through the AQR. Capital shortfalls are expected to be unveiled by the EBA's stress tests, but the industry recognises that when added to the plethora of new regulations at EU level, the stress tests are making banks more cautious and resulting in a reduction in lending to the real economy. (MB)