ECB Eyes Banks’ Capital Quality as Supervisory Priority

The European Central Bank may use its regulatory clout to make sure euro-area lenders are adding the right kind of capital, not just the right amount.

Policy makers say banks have added almost 200 billion euros ($258 billion) of additional capital since mid-2013 to boost their resilience. Yet only about a quarter of that sum is pure equity, as banks stock up on hybrid debt and tax arrangements whose loss absorbency is largely untested.