"The European Central Bank (ECB) announced details on Wednesday for its comprehensive assessment of Eurozone banks, which the monetary authority believes will foster transparency, implement "necessary corrective actions" and build confidence.
"The assessment is an important step in the preparation of the single supervisory mechanism and, more generally, towards greater transparency of the banks' balance sheets and consistency of supervisory practices in Europe," the ECB said in a statement.
The central bank plans to convene meetings in Frankfurt starting in November with banks undergoing the assessment and noted that it expects the process to take 12 months.
The ECB pointed out that the assessment will consist of three elements:
i) A supervisory risk assessment to review, quantitatively and qualitatively, key risks, including liquidity, leverage and funding.
ii) An asset quality review (AQR) to enhance the transparency of bank exposures by reviewing the quality of banks' assets, including the adequacy of asset and collateral valuation and related provisions.
iii) A stress test to examine the resilience of banks' balance sheet to stress scenarios.
The ECB further noted that the assessment will be based on a capital benchmark of 8% Common Equity Tier 1. Furthermore, the monetary authority said that the details concerning the stress test will be announced at a later stage, in coordination with the European Banking Authority (EBA)".
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"The assessment is an important step in the preparation of the single supervisory mechanism and, more generally, towards greater transparency of the banks' balance sheets and consistency of supervisory practices in Europe," the ECB said in a statement.
The central bank plans to convene meetings in Frankfurt starting in November with banks undergoing the assessment and noted that it expects the process to take 12 months.
The ECB pointed out that the assessment will consist of three elements:
i) A supervisory risk assessment to review, quantitatively and qualitatively, key risks, including liquidity, leverage and funding.
ii) An asset quality review (AQR) to enhance the transparency of bank exposures by reviewing the quality of banks' assets, including the adequacy of asset and collateral valuation and related provisions.
iii) A stress test to examine the resilience of banks' balance sheet to stress scenarios.
The ECB further noted that the assessment will be based on a capital benchmark of 8% Common Equity Tier 1. Furthermore, the monetary authority said that the details concerning the stress test will be announced at a later stage, in coordination with the European Banking Authority (EBA)".
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