Brussels, 15/02/2016 (Agence Europe) - Reacting to recent turbulence on stock exchanges which affected banking values, the President of the ECB, Mario Draghi, sent out a reassuring message regarding the solidity of the European banking sector, which has indeed been obliged to increase its own funds, on Monday 15 February.
“In the euro area, the situation in the banking sector now is very different from what it was in 2012. Perhaps most importantly, euro area banks have significantly strengthened their capital positions over the past few years, notably as a consequence of the Comprehensive Assessment ('asset quality review') conducted in 2014. For significant institutions, the CET1 ratio has increased from around 9% to 13%, making them more resilient to adverse shocks”, Draghi said, as part of a monetary dialogue with the committee on economic affairs of the European Parliament. He stressed the stability and predictability of the European prudential regulatory framework stemming from the international 'Basel III' agreement, which will apply completely from 2019 onwards. “There will be no Basel IV”, he added, explaining that the industry now plans its capital structure better.
The former Governor of Banca Italia did not, however, hide the fact that a number of “challenges” remain, such as the treatment of non-performing loans, currently a source of concern among investors. He said that the health check of the ECB of 2014 had made it possible, for the first time, to quantify non-performing loans using a single definition and to require specific provisions to be made. With the action of the Single Supervisory Mechanism within the ECB and the complimentary action of the national supervisors, “we are in a situation of tackling the issue of non-performing debt over the next few years”, Draghi said, stressing that he was not aware of any negotiations between his services and the Italian authorities regarding possible buy-backs of non-performing loans.
The ECB President reiterated the monetary institute's intention of reviewing the scope of its accommodative monetary policy in March, when the updated figures on inflation become available (see EUROPE 11473). The ECB may reduce the interest rate on the deposit facility further into negative figures and/or extend the scale of the 'quantitative easing' programme for the mass purchase of public and private assets.
Lastly, Draghi confirmed that the ECB was cautiously considering taking steps over the issue of the €500 notes suspected of being used to finance terrorism (see EUROPE 11479). (Original in French by Mathieu Bion)