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ECB gets tough on banks

March 11, 2014

The ECB has published a manual with instructions for inspectors reviewing the asset quality of products of the eurozone's biggest lenders. The central bank is to take over banking supervision in November of this year.

Symbolbild EZB Europäische Zentralbank Frankfurt am Main
Image: Odd Andersen/AFP/Getty Images

The European Central Bank (ECB) indicated Tuesday it would look into the eurozone lenders' assets much more thoroughly than had ever been done by national supervisors.

It published a detailed manual providing guidelines for authorities and their third-party supporters in carrying out on-site inspection aimed at checking the quality of the biggest banks' assets in the bloc.

The ECB stated it had selected risk-weighted assets amounting to 3.72 trillion euros ($5.15 trillion) for the review, equivalent to 58 percent of total risky assets across the lenders in question. It also said the estimated average number of credit files to be reviewed per bank would be 1,250, making it the biggest quality check ever performed.

No leniency

The central bank called the asset quality review of 128 big banks in the euro area a crucial instrument to enhance the transparency of their balance sheets and said it would trigger financial repair work where needed and rebuild investor confidence prior to the ECB taking over its supervisory task in November 2014.

Debate over EU banking union

The quality review represents the second phase in a package of measures to prepare ECB banking supervision. It follows a basic risk analysis and will be completed in August of this year.

The final phase will be a thorough stress test for banks when lenders will have to prove they'd be able to survive without state aid under harsh conditions such as a recession or the temporary collapse of the real estate market. In order to be successful, banks have been called upon to considerably increase their core capital.

hg/hc (dpa, Reuters)

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