Tuesday September 30, 2014 Search
Weather | Athens
26o C
17o 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)  
Greek unemployment dips to 27 pct in June, but still highest in EU
EU gives more aid to farmers hurt by Russia sanctions
Greeks ruled ship market in August
Nine properties to be auctioned next week
Three teens questioned over video showing torture of dog
Three teenage boys were taken into custody in Arta, northwestern Greece, on Tuesday following an uproar caused by a video posted on a social networking website allegedly showing them pouring...
Roma camp evacuation postponed; flow resumes on Mesogeion Avenue
Plans to evacuate and partially demolish a Roma encampment in the northern Athenian suburb of Halandri, erected nearly four decades ago on a site behind the present-day Nomismatokopio metro ...
Inside News
SOCCER
All team sports suspended next weekend in memory of dead fan
The government announced on Monday the suspension of all team sports events in Greece scheduled for next weekend, October 4 and 5, in the memory of the Ethnikos Piraeus fan who died a few ho...
SOCCER
Karamanos punishes Michel for deeming him surplus
Atromitos forced Olympiakoss first loss this season in all competitions on Saturday to allow PAOK to go alone on top of the Super League table on Sunday. Odds-on title favorite Olympiakos l...
Inside Sports
COMMENTARY
Next-day jitters
It is usual for Greek governments, whether one-party or coalitions (which are normally loath to actually work together), to claim that their only real challenge is dealing with the countrys...
EDITORIAL
No sweet debt deals
The lions share of Greeces debt is held by European Union member states and the International Monetary Fund. A writedown of the European part of the debt would require the approval of the ...
Inside Comment
SPONSORED LINK: FinanzNachrichten.de
SPONSORED LINK: BestPrice.gr
RECENT NEWS
1. Three teens questioned over video showing torture of dog
2. Greek unemployment dips to 27 pct in June, but still highest in EU
3. Roma camp evacuation postponed; flow resumes on Mesogeion Avenue
4. EU must boost air, sea migrant rescues, says Amnesty International
5. EU gives more aid to farmers hurt by Russia sanctions
6. Commissioner-designate Avramopoulos to face three-hour interview on EUs migration portfolio
more news
Today
This Week
1. Roma camp off Mesogeion Avenue set for demolition amid reactions
2. Next-day jitters
3. No sweet debt deals
4. Commissioner-designate Avramopoulos to face three-hour interview on EU's migration portfolio
5. EU gives more aid to farmers hurt by Russia sanctions
6. EU must boost air, sea migrant rescues, says Amnesty International
Today
This Week
1. Alexander the Great's tomb not at Amphipolis, says Culture Minister
2. Greece may opt for unusual president to avoid snap polls, Venizelos says
3. Woman allegedly buried alive by accident in northern Greece
4. Salaries in Greece continue to slide, dipping 1.4 pct in Q2
5. Venizelos denies jihadis are being trained in Greece
6. Should you bet with Kissinger on where the world is heading?
Find us ...
... on
Twitter
... on Facebook
About us  |  Subscriptions  |  Advertising  |  Contact us  |  Athens Plus  |  RSS  |   
Copyright 2014, H KAΘHMEPINH All Rights Reserved.