ECB Will Supervise 120 Significant Banks From November

The European Central Bank updated the list of banks it considers significant enough to supervise, trimming the total and adding two Russian-owned lenders and a unit of Barclays Plc.

Just over four months before of the start of the Frankfurt-based Single Supervisory Mechanism under the ECB, officials removed 12 and placed four banks on its tally of institutions either large or complex enough to merit closer attention. While the ECB last year deemed 128 institutions as significant based on end-2012 data, that total is now down to 120 using figures from the end of last year.

“Since then, open issues have been clarified and missing figures were made available over the past few months,” the ECB said in an e-mailed statement provided by a spokesman. “The cross-border criterion had not been considered to a full extent back then.”

The ECB has been tasked with overseeing the euro-area’s lenders as part of a nascent banking union, intended to prevent a repeat of the taxpayer-funded bailouts of lenders since the financial crisis. Banks are currently being subjected to an unprecedented, year-long review of their assets, the results of which will be released in October.

Sberbank Europe AG and VTB Bank Austria were included as a result of the cross-border assessment, and will undergo a similar asset review to the rest of the directly-supervised lenders next year, according to a spokesman for the Austrian central bank.

Russian Units

The Vienna-based unit of Russia’s Sberbank manages businesses in eastern European countries including the Czech Republic, Slovakia, and Slovenia. VTB’s Austrian subsidiary manages the Russian lender’s western-European business and takes deposits in Germany via online banking. The ECB can judge a relatively small bank as significant if it conducts a large amount of business in multiple countries.

Barclays Italy, owned by its U.K.-based namesake, operates in the country through 125 branches and is focused on retail and private banking, and on financial advisory services, according to its website. That lender and Banque Degroof SA/NV of Belgium were also added to the list.

Twelve lenders were removed from the ECB’s list, to be supervised by national authorities as before. Those include Germany’s state-backed development bank KFW, Bank of America Corp’s Dublin-based Merrill Lynch International, and clearing houses Clearstream Banking SA and Banque Centrale de Compensation SA -- LCH Clearnet. The ECB didn’t comment on why those lenders had been removed.

Final List

Bank of America plans to move most of the derivative assets on the balance sheet of its Irish unit to its London operation by the end of this year, people familiar with the matter said earlier this month. Dublin-based Merrill Lynch International’s balance sheet has fallen by $187 billion to $406 billion in the past two years as it moved derivatives contracts to the U.K.

Dexia SA, the bailed-out French-Belgian lender that’s being wound down, will still be supervised directly from Frankfurt even though it has been exempted from parts of the ECB’s stress test exercise, the document published today shows.

A final list of banks to be supervised by the institution will be completed by September 4, the ECB said in the document published late yesterday. Banks have two weeks to submit questions or complaints related to their inclusion in the list.

The basic criteria for being considered significant are holding assets worth more than 30 billion euros ($41 billion), holding assets exceeding 20 percent of the gross domestic product of the home country, or being one of the three largest lenders in the participating member state.