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ECB briefs heads of top banks ahead of ‘stress tests’

The euro sign landmark at the headquarters of the European Central Bank in Frankfurt. Photo: Kai Pfaffenbach/Reuters

The euro sign landmark at the headquarters of the European Central Bank in Frankfurt. Photo: Kai Pfaffenbach/Reuters

Bosses from top eurozone banks gathered at the European Central Bank yesterday to find out what it will be looking for in its upcoming ‘stress tests’ on their balance sheets.

Before the ECB takes up its new role supervising eurozone banks from late next year, it plans to run a series of rigorous tests to uncover any possible shortfalls on the lenders’ balance sheets to avoid any surprises once it has taken charge.

Yesterday’s briefing is the first of three meetings the ECB has set up with the chief executives or chairpersons of the bloc’s 128 largest banks at which they will have the opportunity to ask questions about the review it will hold next year.

The meetings are being chaired by ECB President Mario Draghi, his deputy, Vitor Constancio, and the head of the ECB’s financial stability division, Ignazio Angeloni.

In addition to German banks, executives from lenders in Belgium, Cyprus, Malta and Luxembourg are dueto attend the meeting

Gerd Haeusler, CEO of German state-owned lender BayernLB, was among those attending the meeting.

BayernLB chief financial officer Stephan Winkelmeier said during the quarterly earnings conference call: “During this setting-up phase, we will be well advised to have an intensive exchange so that the whole exercise will reveal a reliable picture of the European banking sector before the ECB takes charge.”

In addition to German banks, executives from lenders in Belgium, Cyprus, Malta and Luxembourg are were to attend the meeting yesterday. The other meetings are scheduled for November 18 and November 25, an ECB spokeswoman said.

UniCredit CEO Federico Ghizzoni will take part in the November 25 meeting.

“They have started calling in the CEOs of banks,” he said.

The ECB and national bank supervisors are in the process of selecting certain portfolios for the asset quality review, which will be different from country to country, depending on where the main risks are expected to be.

In the asset quality review, the ECB will check whether banks have classified loans correctly and whether they have set aside enough capital to deal with loans that are unlikely to be repaid.

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