Friday October 31, 2014 Search
Weather | Athens
18o C
13o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
ECB meets bankers before earnings signal unfinished business

By Jeff Black, Shane Strowmatt & Sonia Sirletti

Europe’s lenders are running out of time to get their books in order before the European Central Bank passes judgment on them.

As executives from 128 banks meet in Frankfurt this week with some of the officials examining them, managers of the ECB’s Comprehensive Assessment are working out a mid-October date for final disclosure and guiding lenders through a conclusive stress test. Meanwhile institutions including Erste Group Bank AG (EBS) are stepping up efforts to take the sting out of the outcome by acknowledging losses and raising fresh capital.

Aiming to create a clean sheet for the region’s wounded lenders and foster credit to the economy, the ECB is urging them not to wait until the results of its health check are out. As its Asset Quality Review comes to an end this month, a round of quarterly earnings should boost the 104 billion euros ($141 billion) worth of measures cited by the ECB as already taken by banks to strengthen balance sheets.

“The comprehensive assessment is as much about the process as the results,” said Bridget Gandy, managing director for financial institutions at Fitch Ratings Ltd. in London. “It shouldn’t be that you have to wave a stick at the banks and tell them to get the capital in after the results, they should be -- and largely are -- doing whatever they can now.”

Ravaged economies

Last week, Erste, the Austrian bank earning most of its income in eastern Europe, said it will post a loss this year of up to 1.6 billion euros as bad-loan provisions rise 40 percent more than forecast. Erste Chief Executive Officer Andreas Treichl said the measures will help the bank pass the ECB’s assessment.

Exposures to economies ravaged by the European debt crisis such as Italy and Spain will force other lenders to set aside cash against soured loans too, according to Cyril Meilland, an analyst at Kepler Cheuvreux.

The second quarter is likely to be “a high mark for provisions,” he said. “We definitely do expect most banks will be booking either gradually larger provisions in connection with the AQR and stress tests, or in response to requirements from the ECB and other supervisors.”

A further challenge to European bank balance sheets is coming from fines and litigation costs. Commerzbank AG (CBK), Germany’s second-largest lender, will probably be the next institution to resolve alleged U.S. sanctions violations, a person with knowledge of the matter said. The probe is part of a U.S. crackdown on financial institutions for handling funds linked to blacklisted nations that led to a record $8.97 billion fine against BNP Paribas SA. (BNP)

Brussels meeting

Second-quarter earnings from euro-zone banks will intensify in the final week of July, as Germany’s largest lender, Deutsche Bank AG (DBK), reports on July 29 followed by BNP Paribas SA and Banco Santander SA (SAN) both on July 31.

Chief financial and risk officers will gather for a three-day series of meetings with ECB officials running the comprehensive assessment, beginning Tuesday. They can expect a run-through of how the central bank plans to disclose the results in October, a process that will include divulging the ECB’s assessment of capital levels according to lenders’ balance sheets as of Dec. 31, 2013.

The ECB’s assessment on any shortfalls that emerge will also include an appraisal of what the bank in question has done to improve its position since the beginning of the year. Banks need to show they hold capital worth 8 percent of risk-weighted assets for the asset review and 5.5 percent for the adverse scenario of the stress test.

Technical failures

So-called technical failures, where a bank fails the test according to its end-2013 balance sheet but passes on the basis of what it has done since then, are a likely outcome, according to Fitch’s Gandy.

“It would be dangerous for financial stability if a lot of institutions which showed up in the results as failures hadn’t done anything since the end of 2013, the date the tests are based on,” she said. “The half-year results are going to be very interesting.”

To give time for the market to digest the information before the central bank takes over supervision on Nov. 4, officials have penciled in a date of Friday, Oct. 17, to disclose the outcome publicly, according to two people familiar with the discussions. That date could still change.

The ECB has not confirmed a date and will do closer to the time, a spokeswoman said in a statement, adding that officials have pointed to publication in the second half of October.

Uncertainty persists

To get there, the ECB still has to process what could be the most technically demanding part of the Comprehensive Assessment. Data gleaned from the AQR -- which involves 6,000 auditors sifting through about 160,000 credit files across the euro area -- must be combined with banks’ estimates of losses under the adverse scenario of the stress test, all without revealing too much about the ECB’s appraisal of a lender’s balance sheet before disclosure day.

While such uncertainty persists for banks, they might as well seize the initiative and put more money aside early for unrealized losses, said Andreas Plaesier, an analyst at M.M. Warburg in Hamburg.

“If you revalue things now and increase capital early, it’s more positive than waiting until later, when everything’s public and you have to react,” he said. “I could also imagine that capital increases remain a topic before the stress test results come out.” [Bloomberg]

ekathimerini.com , Tuesday Jul 8, 2014 (13:03)  
Greek retail sales rise for third month in a row
Germany’s 10-year bonds decline before euro-area inflation data
Cyprus’s Georgiades Bets on Economy for Irish-Style Bailout Exit
Power rates soared 60 pct in six years
Police clear apartment used by rebel monks
Dozens of Greek police took part in an operation Friday to clear an apartment used as a hostel by a rebel monastery whose monks have been declared schismatic by the Orthodox Church. Police s...
Traffic accidents rise 1.3 pct in August, year-on-year
The number of traffic accidents in Greece that caused death or injury rose by 1.3 percent in August this year compared to the same month in 2013, figures released by the Hellenic Statistical...
Inside News
BASKETBALL
Obradovic watches Greens thrash his Fenerbahce
The second homecoming of former Panathinaikos coach Zeljko Obradovic, now at Fenerbahce, was not as emotional as last year’s, but it was certainly was the night of an emphatic triumph for th...
SOCCER
Berg returns to add spice to Panathinaikos´s Cup win
The second round of games for the group stage of the Greek Cup produced plenty of interesting games and results in midweek, but it still lags the upset potential that the knock-out stages of...
Inside Sports
COMMENTARY
The judiciary’s responsibility
The reform efforts over the past few years have begun to bear fruit. Greece has improved its standing in the World Bank’s Doing Business rankings, rising 48 positions from 2010 to 61st place...
EDITORIAL
Findings raise eyebrows
An investigation into money transferred to foreign banks by civil servants since 2010, when Greece’s brutal debt crisis erupted, has come up with some striking findings. The checks, which we...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
 RECENT NEWS
1. Police clear apartment used by rebel monks
2. Greek retail sales rise for third month in a row
3. Traffic accidents rise 1.3 pct in August, year-on-year
4. New defense minister to be appointed without reshuffle
5. Germany’s 10-year bonds decline before euro-area inflation data
6. Cyprus’s Georgiades Bets on Economy for Irish-Style Bailout Exit
more news
Today
This Week
1. Man shot dead, woman injured in Vathis square attack
2. Germany’s 10-year bonds decline before euro-area inflation data
3. Cyprus’s Georgiades Bets on Economy for Irish-Style Bailout Exit
4. New defense minister to be appointed without reshuffle
5. Traffic accidents rise 1.3 pct in August, year-on-year
6. Greek retail sales rise for third month in a row
Today
This Week
1. Austria’s creative bookkeeping beats Greece on secret debts
2. End of reason, end of humanity
3. Clean bill of health for Greek banks from stress tests
4. Samaras pledges action after flash floods in Athens
5. Eurobank, National Bank restructurings eliminate capital gap
6. Athens flood damage assessed, compensation payments to begin
   Find us ...
  ... on
Twitter
     ... on Facebook   
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright © 2014, H KAΘHMEPINH All Rights Reserved.