Draghi goes face-to-face with bank chiefs on asset-health probe

Bank executives traveled to Frankfurt for a first round of meetings with European Central Bank President Mario Draghi on the ECB’s review of lenders’ assets.

Chief executive officers from banks from five countries — Germany, Belgium, Cyprus, Malta and Luxembourg — are meeting on Wednesday with Draghi and other board members at the ECB’s headquarters, a spokeswoman for the central bank said by telephone. That list includes Europe’s largest investment bank by revenue, Deutsche Bank AG, and smaller lenders such as Malta’s Bank of Valletta Plc.

The ECB began a three-stage probe this month into the balance sheets of lenders across the 17-nation euro area, as a precursor to its assumption of financial supervision duties in November next year. UniCredit SpA CEO Federico Ghizzoni, who may join a group convening in Frankfurt on Nov. 25, said Tuesday his institution is cutting expenses and setting aside more provisions as it prepares for the review.

Executives will meet with Vice-President Vitor Constancio and Executive Board member Yves Mersch, both of whom are responsible for setting up the ECB’s bank supervisor, the spokeswoman said. Mersch will brief officials on preparations for the oversight duties, while Constancio will give a presentation on the asset review.

The ECB’s three-stage process is called the Comprehensive Assessment, beginning with an operation to identify portfolios requiring deeper scrutiny, followed by an examination known as the Asset Quality Review. Following those are stress tests simulating the effect of a range of adverse scenarios.

Ignazio Angeloni, the ECB’s director general for financial stability, will also meet bankers; representatives from each country’s national regulation authority will also be present.

Further group meetings are planned for Nov. 18 and Nov. 25. The Nov. 18 round will include bankers from Estonia, Spain, Finland, France, Greece and Ireland. Executives from banks in Italy, Latvia, the Netherlands, Portugal, Slovenia, Slovakia and Austria will travel to the ECB on Nov. 25.

Some of the executives visiting the ECB on Wednesday represent the banks among the most leveraged in Europe. The ECB singled out German, Belgian and Cypriot lenders in a report on Nov. 4 and said they need to make progress in increasing their equity as a share of assets. ECB officials have also said they’ll focus on asset areas known to contain higher levels of non-performing loans when selecting portfolios such as shipping loans and commercial real estate.

The results of the ECB’s review and stress tests — as well as the possibility that information will leak before the end of the process — could affect financial stability, the head of Germany’s main banking association said in Frankfurt on Oct. 30.

“This is a very complex project that comes with significant risks,” Michael Kemmer, general manager of the Association of German Banks said. The information that the ECB has provided until now is “relatively vague and undetailed.”


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