ECB makes concessions for banks to help them meet tight deadlines
Print Edition
THE European Central Bank has quietly made a series of concessions to banks that will make it easier for them to meet the tight deadlines of a landmark review of their businesses, four sources familiar with the process said.
The sources said the ECB has dropped requests for some difficult-to-obtain details like VAT numbers of company borrowers, waived some interim deadlines and allowed banks to produce data on smaller numbers of loans in some circumstances.
The changes do not compromise the accuracy and thoroughness of the tests, the sources said, but they make it more likely that banks will meet the overall deadline to allow the review’s results to be published in October.
This means there is less chance the ECB will lose credibility by failing to hit deadlines that have been described as ambitious from the off, but too much flexibility could be perceived negatively by investors who want the eurozone’s banks held up to tough scrutiny.
The review, billed as the toughest banks have ever gone through, aims to encourage them to recognize losses on loans or investments that have gone bad, allowing them to regain investors’ trust and freeing up capacity to grant new loans to help the eurozone’s fragile economic recovery.
The ECB has insisted there is no flexibility around key elements like obtaining independent valuations for collateral held against loans and using external models to challenge banks’ forecasts of loan losses.
Those key elements are seen as crucial to maintaining the credibility of the exercise which covers the 128 eurozone banks the ECB will begin directly supervising from November, including international titans like Santander and Deutsche Bank and nationally-important ones like Malta’s Bank of Valletta and Italy’s Monte dei Paschi.
Banks have balked at the demands of the tests, which Dutch bank ING last week said it had “about 200” staff working on full-time. The industry has lobbied the ECB for changes to make the work less onerous at several meetings in Frankfurt.
The ECB has made no public concessions.
“It’s unfair for the ECB to be portrayed as totally inflexible and lacking any form of pragmatism (although) in the early days they were very much driven by the AQR (asset quality review) methodology,” said one source familiar with the review, referring to details in a 285-page manual published on March 11.
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