Saturday November 29, 2014 Search
Weather | Athens
16o C
10o C
News
Business
Comment
Life
Sports
Community
Survival Guide
Greek Edition
Constancio says banks cash calls cut risk of ECB test fail

Jeff Black & Boris Groendahl

European Central Bank Vice President Vitor Constancio said lenders in the region are reducing the risk of failing a balance-sheet review by taking pre-emptive steps to increase capital ratios.

“We estimate that, based only on public information, banks since July last year have strengthened their balance sheets by an amount of 104 billion euros ($144 billion),” Constancio said in an interview with Bloomberg Television in Frankfurt on Tuesday. “Some of the measures have been really spectacular.”

As an October reckoning with the results of the ECB’s yearlong Comprehensive Assessment looms, lenders from Italy’s Banca Monte dei Paschi di Siena SpA to Austria’s Raiffeisen Bank International AG have announced share sales to boost their ability to withstand losses. That process will lower the number of banks that fail the ECB’s test, Constancio said.

“What we will find out will be less than what it would have been if the banks hadn’t front-loaded,” Constancio said. “We aren’t concerned with that fact because the market is aware of what is going on.”

Lenders in Greece, Italy and Austria are among those who are selling new shares to increase their capital ratios, while others have reduced riskier assets to help pass the test. The ECB has set a required ratio of 8 percent of capital to risk- weighted assets for its asset-quality review and 5.5 percent for the subsequent stress test.

Share sales

The ECB said Tuesday that, of the 128 banks in the assessment, those judged to be lacking capital will have to submit a plan to the central bank and will have as much as nine months to plug the shortfall. The ECB has previously urged executives not to wait until then before improving their capital positions.

Greece’s Eurobank Ergasias SA is the latest euro-area bank to bolster its reserves by selling new shares in a 2.86 billion- euro offer. That follows Raiffeisen’s 2.78 billion-euro sale announced in January, and comes as Monte dei Paschi, the world’s oldest bank, seeks to raise 5 billion euros.

Morgan Stanley estimates that European banks have announced measures to strengthen their capital by about 35 billion euros since last July. Those capital-strengthening measures also included asset sales, according to Huw Van Steenis, a London- based analyst at the bank.

‘Front-loading’

“The banks have been front-loading, preparing for the Comprehensive Assessment in a very significant way,” Constancio said. “Markets are becoming aware of this, as stock prices of European banks have increased a lot. That’s a recognition of the change in the balance-sheet position of the banks.”

The results of the assessment are due before the Frankfurt- based ECB becomes the euro area’s top bank supervisor in November. The European Banking Authority and the ECB on Tuesday released details of the adverse scenario that lenders must withstand in the stress test to pass.

In the simulated 3-year outlook for the economy, growth in gross domestic product is 7 percentage points lower than the European Union currently forecasts. The shock to the economy includes a rout in global bond markets and a currency crisis in eastern Europe.

“The deviation in what regards the evolution of GDP between the baseline scenario and the adverse scenario is 30 percent higher than in previous EBA exercises,” Constancio said. “That’s a good indicator of the severity of our stress tests.”

‘European perspective’

Once the ECB becomes responsible for financial oversight, it will be able to mitigate the kinds of imbalances, such as the uncontrolled lending from Europe’s core to the periphery, that helped ignite the sovereign debt crisis, Constancio said.

“This behavior, which involved both creditors and borrowers, cannot go on in the same way because now there will be a European supervisor looking at both at the same time,” he said. Officials must “take a European perspective in supervision, whereas when they’re in their countries they are by law obliged to defend the national interest. That makes a difference.”

[Bloomberg]

ekathimerini.com , Wednesday April 30, 2014 (14:34)  
Q3 growth was bigger than thought
Who will pay for the states ADMIE stake?
Christmas budgets slashed due to higher taxes, healthcare costs
Finance Ministry inundated with applications for debt settlement
Venizelos extends invite to Turkey at start of visit
Foreign Minister Evangelos Venizelos arrived in Ankara Friday night for two days of talks. Ahead of his visit he sought to make it clear that Greece is prepared to discuss maritime issues wi...
Vatopedi trial for 14 suspects
The Supreme Court decided Friday that 14 people should stand trial for the notorious property swap between the Vatopedi Monastery and the state six years ago. Those who will face charges of ...
Inside News
BASKETBALL
One more emphatic win sees Panathinaikos make top 16
Panathinaikos has mathematically qualified to the top 16 of the Euroleague after another emphatic home win, this time against Bayern Munich, with an 87-72 score on Friday. Given the changes ...
SOCCER
PAOK is one win from Europa Leagues last 32
A late brace by Stefanos Athanasiadis gifted PAOK a precious win at Dynamo Minsk on Thursday, meaning that the Thessaloniki team is one win away from graduating from the group stage of the E...
Inside Sports
COMMENTARY
Change of US president wont mean change of foreign policy
Americans have again voted for change in Washington as opposition Republicans take control of both houses of the US Congress. As attention now turns to the 2016 presidential race, it's time ...
COMMENTARY
The presidential election paradox
A few days ago, speaking with a visiting colleague who neither works in Europe nor covers events here, I suddenly felt how much we Greeks take for granted some things that should have worrie...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
RECENT NEWS
1. One more emphatic win sees Panathinaikos make top 16
2. Venizelos extends invite to Turkey at start of visit
3. Vatopedi trial for 14 suspects
4. New proposals on way to troika
5. Cabbie who carried shooter claims he was threatened
6. Govt urged to allow Syrian refugees to move on
more news
Today
This Week
1. Change of US president won't mean change of foreign policy
2. Child molester suspect photo released by police
3. Greek economy expands 0.7 pct q/q in Q3
4. Lebanese FM: Cyprus may be jihadi transit point
5. Athens water supply 9-month profit falls 45 pct on lower charges
6. Armed man arrested on Thessaloniki campus
Today
This Week
1. Give Greece a chance
2. Extremism from a bygone era
3. Scientists expand excavation of ancient Amphipolis
4. Greece paralyzed by major strike, flights cancelled
5. Piraeus nightclub shooting leaves 3 seriously injured
6. Coscos Greek unit adds multinational rail-freight client
Find us ...
... on
Twitter
... on Facebook
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright 2014, H KAΘHMEPINH All Rights Reserved.