The European Central Bank (ECB) has identified a shortfall totalling €1.74bn at five of the nine banks its has been assessing between March and November.”Shortfalls amount to €1.74bn resulting from CET1 ratios falling below threshold of 5.5% in adverse stress test scenario, after including impact of asset quality review (AQR),” a statement released by the ECB’s banking supervision department read.
An initial comprehensive assessment by the ECB is a requirement of all banks that become or are likely to become subject to direct ECB supervision. The exercise consisted of an asset quality review (AQR) and a stress test.
No bank fell below the threshold ratio of 8% CET1 after the AQR, but the effect of the combined AQR and stress test resulted in five banks falling below the threshold ratio of 5.5% CET1 in the adverse scenario.Four of the banks have already covered the shortfall.
The total capital shortfall will partly be covered by recent capital increases undertaken since January 2015 and other eligible measures.The statement said: “The banks will be required to address remaining shortfalls in a timely manner by issuing capital instruments or undertaking other eligible measures to restore their capital positions to the required levels.
“This implies that shortfalls arising from the adverse scenario of the stress test will be expected to be covered within nine months after the publication of the comprehensive assessment results.”
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