Brussels, 17/07/2014 (Agence Europe) - On Thursday 17 July, the European Central Bank (ECB) gave details of how it will be unveiling the results, expected for the second fortnight of October, of its asset quality review (AQR) of the 128 big banks in the eurozone.
The ECB will become supervisor of eurozone banks in November 2014 as part of banking union, and has published the templates that will be used to summarise the results of the ECB's AQR and the stress tests carried out by the European Banking Authority (EBA). The documents will include specific data for each bank and a report with aggregate data to provide an overview.
Under AQR, the data to be used by the ECB are those available as at 31 December 2013, but capital raised by banks from the market from January to September 2014 to boost their capital will be listed to give an idea of further changes to bank's capital structure. They may be taken into account in the event of any capital shortfall that is found.
In order to avoid leaks, the banks will only be given access in the autumn to ongoing results of the assessments. In a press release, the ECB says: “It is important to note that no bank will be given certainty on the full overall result” in prior verification meetings with the bank. The 128 banks in question will learn the final results shortly ahead of the official publication.
In the fortnight following publication of the results, banks for which a capital shortfall has been found will have to present action plans explaining how they are planning to fill the capital gap. Depending on the nature of the deficit, they will have 6 months (if the deficit arises from the AQR or the baseline scenario in the stress tests) or 9 months (if the deficit arises in the adverse scenario in the stress tests) to boost their capital.
The banks will only be allowed to sell assets to make up the shortfall on an exceptional basis if they can clearly be identified as distinct from normal business operations, such as the sale of share portfolios or subsidiaries. The impact on capital of deleveraging and restructuring agreed with the European Commission may be taken into account, along with the sale of risk-weighted assets under very strict conditions. Profit retention will not be eligible from 2014 onwards to fill capital shortfalls highlighted during the AQR.
Earlier this month, the Ecofin Council laid down rules for any public financial intervention that might be required to bridge banks' capital shortfalls when the results of the AQR and stress tests are published (see EUROPE 11118). (MB)