1. Was the ECB's Comprehensive Assessment up to standard?
- Author:
- Willem Pieter De Groen
- Publication Date:
- 11-2014
- Content Type:
- Policy Brief
- Institution:
- Centre for European Policy Studies
- Abstract:
- The Comprehensive Assessment conducted by the European Central Bank (ECB) representsa considerable step forward in enhancing transparency ineuro-area banks' balance sheets. The most notable progress since the previous European stress test has been the hamonisation of the definition of non-performing loans and other concepts as well as uncovering hidden losses, which resulted in a €34 billion aggregate capital-chargenet of tax. Despite this tightening,most banks were able to meet the 5.5% common equity tier 1 (CET1) threshold applied in the test, whichsuggests that the large majority of the euro-area banks have improvedtheir financial position sufficiently to no longer constrainthem in financing the economy.Our own estimation based on the detailed results, however,provide a more nuanced picture, with a large numberof the banks still highly leveraged and in many cases unable to meet the regulatory capital requirementsthat will be introduced in the coming years underthe adverse stress test scenario.
- Topic:
- Debt, Economics, International Trade and Finance, and Global Recession
- Political Geography:
- Europe