ECB to submit banks to tough health tests
THE European Central Bank (ECB) vowed yesterday to submit the eurozone's top banks to a comprehensive batch of tests next year, staking its credibility on a review that aims to build confidence in the sector.
The ECB wants to unearth potential risks hidden in balance sheets before supervision is centralised under its roof from November next year as part of a European banking union drawn up in response to a debt crisis exacerbated by massive bad property loans in countries like Ireland and Spain.
Setting out its plans to scrutinise the 128 top eurozone lenders, the ECB said it would use tougher new measures set out by Europe's top regulator - the European Banking Authority (EBA) - in the asset quality review it will conduct next year.
"A single comprehensive assessment, uniformly applied to all significant banks, accounting for about 85 per cent of the euro area banking system, is an important step forward for Europe," said ECB president Mario Draghi. "We expect that this assessment will strengthen private sector confidence in the soundness of euro area banks and in the quality of their balance sheets."
The ECB said it will conclude its assessment in October next year, before assuming its supervisory tasks in November, although some policymakers have suggested that timing could slip.
If capital shortfalls are identified, banks will be required to make up for them, the ECB said. Draghi has said a "public backstop" must also be available.
A provisional list of banks to be reviewed includes 24 German banks, 16 in Spain, 15 in Italy, 13 in France, seven in the Netherlands, five in Ireland and four each in Greece, Cyprus and Portugal. Reuters