SIGN IN YOUR ACCOUNT TO HAVE ACCESS TO DIFFERENT FEATURES

FORGOT YOUR PASSWORD?

FORGOT YOUR DETAILS?

AAH, WAIT, I REMEMBER NOW!

Mario Randholm

  • LOGIN
  • Home
    • Team Experience
      • Mario Randholm
  • Blog
  • Resources
    • Partners
      • Thomson Reuters
      • MultiCharts
      • Municipalidad de Miraflores
      • TradingDiary Pro
    • AutoTradingAutoTrading
    • R Option ModelModel
    • Historical Performance
    • Comparison Matrix
  • Memberships
  • FAQ
    • Term of Service
Contact Us
  • Home
  • Blog
  • Market Update
  • ECB keeps banks on tight leash

ECB keeps banks on tight leash

randholm
July 10, 2014 1:27 am / Published in Market Update

ECB keeps banks on tight leash

UPDATE 2-EXCLUSIVE-ECB keeps banks on tight leash with Oct test results -sourcesRTRS

09-Jul-2014 20:06

  • Banks to get 48 hours to review test results in Oct
  • ECB to publish banks’ CET1 and leverage ratios
  • Bankers fear publication schedule is too demanding

(Adds ECB plans to publish leverage ratio, background)

By Andreas Kröner

FRANKFURT, July 9 (Reuters) – The European Central Bank aims to keep banks on a tight leash in the final phase of a balance sheet health check in October, giving them just 48 hours to review the test results before publishing them, two persons familiar with the matter told Reuters on Wednesday.

The comprehensive assessment, conducted by the ECB before it starts supervising the euro zone’s top 120 banks from Nov. 4, will examine banks’ balance sheets and weigh up their ability to withstand shock and stress.

The assessment includes an asset quality review, or AQR, and a stress test that runs banks’ books through tough scenarios to check the robustness of their finances.

Banks delivered preliminary results of the stress tests conducted with the London-based European Banking Authority to the ECB around two weeks ago, said one person attending the ECB meeting in Frankfurt.

“As a consequence, most banks should know whether they face problems at the stress test or not,” he said.

ECB officials proposed revealing the results to banks for accuracy checks 48 hours before making them public in October, raising the ire of some bankers who say they need more time, according to two bankers who attended the meeting.

“Banks can’t comprehend this highly complex AQR process within 48 hours in a way that they can sign it off in good conscience,” said one person familiar with the matter.

The review, unprecedented in Europe for its complexity and breadth, is designed to ensure the health of the euro zone’s financial system and restore confidence in it.

The ECB faces a delicate balancing act as it tries to maintain the secrecy of its work to avoid any breaches of market disclosure rules, while not blind-siding banks with unforeseen capital demands that they could struggle to fulfil.

The ECB said the 48-hour deadline was one element in an ongoing dialogue with the 128 banks it was reviewing.

“We will communicate with the banks directly concerning exact timelines for the disclosure of the final result of the Comprehensive Assessment closer to the end of the process,” said a spokesman in an emailed statement.

The ECB aims to publish figures for each bank including total assets, risk exposure and a widely used gauge of balance sheet muscle called CET1, or common equity tier one capital, said one banker attending the meeting.

Moreover, the ECB wants to publish banks’ leverage ratios, a proposal criticized by several banks because this measure, though widely used to compensate for distortions in CET1 calculations, is not yet a formal regulatory requirement in Europe, two sources said.

The comprehensive review is designed to restore confidence in a banking market that has traded at lower valuations than the U.S.’s since the financial crisis, as investors pondered the real state of European banks’ balance sheets.

All results will be released in October. Banks have made extensive preparations ahead of the tests, including raising over 100 billion euros ($136 billion) in the nine months to April, shedding assets and writing off bad debts.

(Additional reporting by Andreas Framke and Laura Noonan; Editing by Robin Pomeroy and Hugh Lawson) (([email protected])(+49 69 7565 

© Thomson Reuters 2014. All rights reserved.

©Thomson Reuters 2013. All rights reserved. The Thomson Reuters content received through this service is the intellectual property of Thomson Reuters or its third party suppliers. Republication or redistribution of content provided by Thomson Reuters is expressly prohibited without the prior written consent of Thomson Reuters, except where permitted by the terms of the relevant Thomson Reuters service agreement. Neither Thomson Reuters nor its third party suppliers shall be liable for any errors, omissions or delays in content, or for any actions taken in reliance thereon. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.

Check your inbox or spam folder to confirm your subscription.

Categories

Twitter

Lightning fast alerts:

twitter.com/MarioRandholm

twitter.com/RandBots

Archives

Privacy & Cookies: This site uses cookies. By continuing to use this website, you agree to their use.
To find out more, including how to control cookies, see here: Cookie Policy

ABOUT US

Mario Randholm Blog. Mario is the founder of Randholm & Co. S.A.C., an investment management company dedicated to producing superior returns for its clients and employees by adhering to mathematical and statistical methods.

CONTACT US

Message us

Mario's Linkedin

Past performance is no guarantee of future results.

Disclaimer:

This site is for informational purposes only. Nothing on this site should be considered investment advice or as a solicitation to buy or sell any security.

Please see our full Disclaimer.

TOP