ECB to present in July results on bank vulnerability

The European Central Bank (ECB) is confident that it will be able to publicly discuss “at the end of July” the results of the test it is carrying out to assess the vulnerability of European banks to the potential impact on their balance sheets of macroeconomic circumstances, as well as of the Covid-19 pandemic.

“I hope to be able to publicly discuss the result of the exercise at the end of July and, thereby, give all market participants more clarity on the path that will lead us out of this environment of extraordinary measures and back to a long-awaited normality”, highlighted the President of the Supervisory Board of the European Central Bank (ECB), Andrea Enria.

The exercise, carried out without overloading institutions with requests for additional data, aims to assess how banks would cope with an environment under the new ECB macroeconomic projections, announced on June 4 and incorporating different scenarios for the 2020-2022 horizon depending on the evolution of the pandemic.

“We will check whether the currently available capital reserves would be sufficient to cover the losses derived from the adverse developments of a second round of infections and closure measures,” explained the Italian director.

In this regard, Enria noted that, while some entities use overly optimistic macro scenarios in their year-end capital projections, others are not even in a position to produce scenarios.

“The cost of risk measured by banks has increased very little between the first quarter of 2019 and the first quarter of 2020, perhaps too little for a large proportion of institutions, while it has increased substantially for a smaller set of European banks,” he pointed out.

K. Tovar

Source: dpa