Business World

Sunday 24 September 2017

ECB relaxes rules on bank tests to ensure deadlines are met

President of the European Central Bank, Mario Draghi
President of the European Central Bank, Mario Draghi

The European Central Bank has quietly made a series of concessions to banks that will make it easier for them to meet the tight deadlines of a landmark review of their businesses, according to sources familiar with the process.

The sources said the ECB has dropped requests for some difficult-to-obtain details like VAT numbers of company borrowers, waived some interim deadlines and allowed banks to produce data on smaller numbers of loans in some circumstances.

The changes do not compromise the accuracy and thoroughness of the tests, the sources said, but they make it more likely that banks will meet the deadline to allow the review's results to be published in October.

This means there is less chance the ECB will lose credibility by failing to hit deadlines that have been described as ambitious from the off, but too much flexibility could be perceived negatively by investors who want the eurozone's banks held up to tough scrutiny.

"There is a danger that by asking for too much detail on loans, the ECB is unable to see the wood for the trees as they get overwhelmed by the density of the data, (but) credibility remains the key watchword on this review," said Andrew Parry, London-based chief executive of fund manager Hermes Sourcecap.

The review, billed as the toughest banks have ever gone through, aims to encourage them to recognise losses on loans or investments that have gone bad, allowing them to regain investors' trust and freeing up capacity to grant new loans to help the eurozone's fragile economic recovery.

The ECB declined to comment. (Reuters)

Irish Independent

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