The ECB’s ’Targeted Review of Internal Models’ (TRIM) – which was carried out at 65 significant institutions in the euro area – was published on Monday 19 April. The review revealed more than 5,000 shortcomings in the way these complex financial institutions value their risk-weighted assets, which are mostly loans to households and businesses.
In order to remedy those shortcomings that were identified, the ECB, acting as the single banking supervisor in the euro area, has required the banks in question to implement corrective actions within specific time limits. “The TRIM investigations will lead to a 12% (or €275 billion) increase in the aggregated risk-weighted assets covered by the models assessed in the respective TRIM investigations”, it said in a statement.
In other words, “over the period 2018-2021, a decrease of about 70 basis points on the core tier 1 (CET1) capital ratios of the in-scope institutions”.
The ECB did not provide detailed results of the review on a per bank or per country basis. However, the solvency ratio of the banks in question should not fall below the minimum level required under EU law, since they have already taken into account the injunctions of the single supervisory mechanism since 2018 or are about to do so regarding notifications received in early 2021.
See the results of the review: https://bit.ly/2Qj60bc (Original version in French by Mathieu Bion)