ECB publishes disclosure process for comprehensive assessment
Disclosure templates showing how the final results will be presented in October were published today
Final results will distinguish between capital shortfalls in the asset quality review (AQR), and those under the baseline and adverse scenarios of the stress test
Disclosures are to provide more information on a consistent basis than in any previous exercise on the balance sheet condition, asset quality and leverage of euro area banks
ECB will conduct a supervisory dialogue with individual banks to check facts and investigate partial findings
The European Central Bank (ECB) has today presented the process for interacting with banks and communicating the results of its on-going comprehensive assessment of 128 banks. It has released “disclosure templates” that show the format in which the findings will be published in the second half of October. In addition, it has provided an update on the progress made in the AQR and stress test exercise.
The comprehensive assessment is a thorough review of the largest banks’ balance sheets prior to the ECB taking over its supervisory tasks as part of the Single Supervisory Mechanism (SSM) in November 2014.
Vítor Constâncio, Vice-President of the ECB, said: “Banks know what we expect and have advance notice to prepare for the outcome of the comprehensive assessment. Much work has already been undertaken to repair banks’ balance sheets and, encouragingly, this work is continuing.”
Danièle Nouy, Chair of the Supervisory Board, said: “As we finalise this tough and rigorous exercise, we are doing our utmost to prepare for a smooth disclosure process. The ECB has been very transparent in engaging with banks and aims to provide as many details as possible to markets and other participants on progress in the comprehensive assessment and what the end of the process will look like.”
The ECB is preparing to incorporate the AQR findings into the stress test (the “join-up”), an element that was previously missing in European stress test exercises. The results of the AQR will be used to adjust the starting point of the stress test. The join-up methodology will be published in the first half of August. The join-up will be carried out, in part, by the banks, as well as by a centrally led team at the ECB. When assessing banks’ own data and the outcomes of their internal models, the ECB-led teams will challenge them with calculations of their own. This is to ensure the credibility of the comprehensive assessment and will apply to both the AQR and the stress test.
The comprehensive assessment results will be published in the second half of October, after having been endorsed by the ECB. Banks will be informed of the full and final results only shortly before they are communicated to the markets. In the run-up to this final disclosure, the ECB and the national competent authorities (NCAs) will discuss partial and preliminary findings with individual banks in what is known as a supervisory dialogue, checking data and facts, and discussing methodological issues.
The public disclosure of the comprehensive assessment results will be based on standardised templates. These include individual bank-by-bank findings, as well as an aggregate report on the full outcome of the exercise for all 128 banks. Individual bank templates will include an overview of their key financial figures, detailed AQR and stress test results, as well as important additional information such as any capital market issuance already undertaken in 2014.
In November, banks will submit their capital plans to the SSM. These will then be assessed by SSM Joint Supervisory Teams (JSTs), which consist of ECB and NCA supervisors, and their implementation will then be monitored closely.
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